Intel announced it would layoff more than 15% of its staff, or 15,000 employees, in a memo to employees on Thursday. The massive headcount is part of a large plan to reduce spending by $10 billion in 2025, following a dismal second quarter earnings report and outlook.
"Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI," said CEO Pat Gelsinger in a memo to employees. "Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected."
As Gelsinger describes, Intel has struggled to capitalize on the AI boom in the same way other hardware companies, such as Nvidia, have. Intel led the tech industry's revolution around CPU chips roughly 25 years ago, but has been slow to embrace newer waves of computing such as smartphones and AI. Gelsinger says annual revenues at Intel fell $24 billion between 2020 and 2023, despite its workforce growing 10% in the same time frame. That's a stark contract to other chipmakers during the AI boom, who have seen revenues and valuations soar to astronomical heights.
Intel reported a 1% decline in revenues for the second quarter compared to the same period last year. The company attributed the loss to gross margin headwinds related to its AI PC products. The company is also suspending its shareholder dividend starting in the fourth quarter of 2024, and anticipates "more challenging" second-half trends than it previously expected.
Beyond the layoffs, Intel will broadly offer applications for a "voluntary departure" program next week to employees at the company, according to the memo. The company is also announcing a companywide enhanced retirement offering for eligible employees.