Chip giant Intel reported its second quarter earnings after the bell on Thursday, missing on the top and bottom lines and announcing a $10 billion cost reduction plan to cut 15% of its workforce and suspend dividend payments. In a release, Intel said it expects Q3 revenue of between $12.5 billion and $13.5 billion, well short of analysts' expectations of $14.3 billion.
Shares of the chipmaker plummeted 20.8% in premarket trading Friday.
Intel is in the midst of a massive turnaround effort as it seeks to regain market share lost to rival AMD while working to build out its AI chip and third-party foundry businesses. All of this comes as the PC market is in the early stages of a recovery after eight consecutive quarters of declines following the explosive growth the industry experienced at the onset of the COVID-19 pandemic.
The company reported earnings per share (EPS) of $0.02 on revenue of $12.8 billion. Analysts were looking for EPS of $0.10 and revenue of $12.9 billion. The company saw EPS of $0.13 on revenue of $12.9 billion in the same quarter last year, according to analyst estimates compiled by Bloomberg.
The chipmaker is also expected to lay off thousands of workers in the coming days, according to Bloomberg. The company is spending billions of dollars on factories and other facilities around the world as it seeks to reclaim its share of the chip manufacturing industry, which is dominated by TSMC.
Intel’s Data Center and AI segment brought in $3.05 billion in the quarter, below expectations of $3.07 billion. The Data Center and AI business offers Intel a chance to grow its revenue thanks to the massive demand for CPUs and GPUs to power AI applications. But Intel’s GPUs aren’t as in demand as Nvidia's, which are seen as the best overall chips for AI processing.
Shares of Intel are off 38% year to date versus AMD, which is down just 3.7%. Nvidia shares are up 127%.
While Data Center and AI get the most attention, Intel’s Client segment, which includes sales of chips for enterprise and consumer computers, is still its largest overall business.
For the quarter, Intel saw Client revenue of $7.4 billion. Wall Street was anticipating revenue of $7.5 billion. The company saw Client revenue of $6.7 billion in the same quarter last year.