Intel (INTC) revealed disappointing Q2 earnings on Thursday, missing top and bottom line expectations and announcing a drastic $10 billion cost-cutting plan. This includes slashing 15% of its workforce and suspending dividend payments.
The chip giant forecasted Q3 revenue between $12.5 billion and $13.5 billion, falling short of analysts’ $14.3 billion expectation. Consequently, Intel’s shares dropped over 20% in pre-market trading on Friday.
Intel is striving to reclaim market share from rival AMD (AMD) and expand its AI chip and third-party foundry businesses. This effort comes as the PC market begins to recover from eight consecutive quarters of decline following the COVID-19 pandemic surge.
In Q2, Intel reported earnings per share (EPS) of $0.02 on $12.8 billion in revenue, missing analysts’ estimates of $0.10 EPS and $12.9 billion in revenue. Last year, Intel posted EPS of $0.13 on the same revenue.
Bloomberg reports that Intel plans to lay off thousands of workers soon. The company is investing heavily in global factories and facilities to regain its position in the chip manufacturing sector, dominated by Taiwan Semiconductor (TSMC).
Intel’s Data Center and AI segment generated $3.05 billion, slightly missing the $3.07 billion expectation. Despite the growing demand for CPUs and GPUs to power AI, Intel’s GPUs are less popular than Nvidia’s (NVDA), which are considered superior for AI processing.
Year-to-date, Intel shares have declined 38%, while AMD is down 3.7%, and Nvidia has surged 127%.
While the Data Center and AI segment garners significant attention, Intel’s largest business remains its Client segment, including chips for enterprise and consumer computers. The Client segment reported $7.4 billion in revenue for the quarter, just shy of Wall Street’s $7.5 billion forecast but up from $6.7 billion last year.
Adding to Intel’s challenges is competition from Qualcomm (QCOM), which recently entered the PC market with its Snapdragon X Elite PC chip, featured in Microsoft’s new Surface Laptop and Surface Pro.
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