Intel (INTC) is leaving investors with a bad case of shock and awe.
Shares of the chip giant crashed more than 21% in pre-market trading on Friday, following quarterly earnings on Thursday that could only be described as brutal. The company's ticker page on Yahoo Finance became the number one most visited this morning, surpassing Amazon (AMZN) and Apple (AAPL) after both tech titans reported better than expected quarters.
Intel missed analyst estimates widely on sales, gross profit margin, and earnings, as it encountered more challenging market conditions and higher than expected costs to ramp AI chip production.
The company took the drastic actions of suspending its dividend, which will go into effect in the fourth quarter. Intel has paid a dividend for 125 straight quarters previously, including $3.1 billion in 2023.
The company further announced a 15% headcount reduction to preserve liquidity. It had about 125,000 employees as of the end of the second quarter.
The company also cut its capital expenditure spending for 2024 by 20% compared to its prior estimate. Capex for 2025 is seen about $5 billion lower than 2024 levels.
"This is the biggest restructuring of Intel I'd say since the memory microprocessor decision four decades ago," Intel CEO Pat Gelsinger told me on Yahoo Finance. Gelsinger says he's in it for the long haul despite being disappointed in the quarter and outlook .
"This is what I signed up for [when I came in as CEO]," Gelsinger added.
The quarter and commentary cast fresh doubt on Intel's efforts to regain a leadership position in an industry dominated by better performing names Nvidia (NVDA) and AMD (AMD).
Earlier this year, Intel won $8.5 billion in grants and another $11 billion in loans from the Biden administration to build semiconductor plants in four states. The build-outs are part of Intel's goal to become a leading maker of chips for other companies, rivaling No. 1 player Taiwan Semiconductors (TSMC).
Now, Wall Street is voicing concern yet again on Intel's turnaround plan.
Said JP Morgan analyst Harlan Sur, "This marks the third consecutive quarter of negative revenue reset, and disappointing guidance, which we believe reflects the challenging industry fundamentals combined with company-specific drivers."
Sur reiterated his under-weight (sell equivalent) rating on Intel.
The earnings rundown
Net Sales: -1% year over year to $12.8 billion vs. estimate of $12.95 billion
Client Computing Sales: $7.4 billion vs. estimate of $7.53 billion
Data Center & AI Sales: $3 billion vs. $3.07 billion
Network & Edge Sales: $1.3 billion vs. $1.4 billion
Mobileye Sales: $440 million vs. $429.7 million
Intel Foundry Sales: $4.3 million vs. $4.47 billion
Adjusted Gross Margin: 38.7% vs. 43.6% estimate
Adjusted EPS: $0.02 ($0.13 a year ago) vs. estimate of $0.10
What else caught our attention: Weak third quarter guidance
Net Sales: $12.5 billion to $13.5 billion vs. estimate of $14.38 billion
Adjusted EPS: ($0.03) vs. $0.30 estimate
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Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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