Source: Wall Street See
In Q2, Intel's revenue declined non-year-over-year by 1%, and the Q3 guidance was the highest decline of 11%, while analysts expected growth of over 1%; the Q3 EPS guidance unexpectedly turned into a loss. Intel plans to cut costs of $10 billion by 2025, and will lay off approximately 0.015 million people, most of which will be completed this year; from Q4, dividends will be suspended for the first time since 1992. The CEO said that the outlook for the second half of the year is more difficult than previously expected and requires bolder action to address the issue of high costs and low profits.
Chip giant Intel brings a series of bad news: both Q2 performance and Q3 guidance have disappointed, and the company will also make large-scale layoffs and suspend dividend distribution.
After the post-market trading on Thursday, August 1st Eastern Time, Intel announced the financial data of Q2 2024, which ended on June 29, 2024, and provided the Q3 performance guidance.
1) Main financial data
Revenue: Q2 revenue was $12.83 billion, a year-on-year decrease of 1%, analysts expected $12.95 billion, and a year-on-year increase of 9% in Q1.
EPS: The adjusted EPS for Q2 on a non-GAAP basis was $0.02 per share, a year-on-year decrease of 85%. Analysts expected $0.10 per share, and a turnaround from a loss to a profit of $0.18 per share in Q1.
Gross Margin: Q2 adjusted gross margin was 38.7%, a year-on-year decrease of 1.1 percentage points, analysts expected 43.6%, and was 45.1% in Q1.
2) Sub-segment business revenue
CCG: Q2 revenue of the Client Computing Group (CCG) business was $7.41 billion, a year-on-year increase of 9%, and analysts expected $7.53 billion, a year-on-year increase of 31% in Q1.
DCAI: Q2 revenue of the Data Center and AI (DCAI) business was $3.05 billion, a year-on-year decrease of 3%, analysts expected $3.07 billion, and a year-on-year increase of 5% in Q1.
Foundry: Q2 revenue of Intel Foundry business was $4.32 billion, a year-on-year increase of 4%, analysts expected $4.47 billion, and a year-on-year increase of 17% in Q1.
NEX: Q2 revenue of Network and Edge Area (NEX) business was $1.3 billion, a year-on-year decrease of 1%, and an 8% decrease compared to Q1.
Other: In Q2, revenue from all other businesses was $0.968 billion, a year-on-year decrease of 32%, a 46% decrease compared to Q1; among them, the revenue of the autonomous driving business MobilEye was $0.44 billion, a year-on-year decrease of 3%, analysts expected $0.4297 billion, and a 48% decrease from Q1, the revenue of the programmable solution business Altera was $0.361 billion, a year-on-year decrease of 57%, and a 58% decrease compared to Q1.
3) Performance guidance Revenue: Q3 revenue is expected to be between US$9.5 billion and US$10.3 billion, with analysts expecting US$9.7 billion.
Revenue: Q3 revenue is expected to be $12.5 billion to $13.5 billion, and analysts expect $14.38 billion.
EPS: The adjusted EPS for Q3 is expected to be a loss of $0.03 per share, and analysts expect EPS to be profitable at $0.30 per share.
Gross Margin: Q3 gross margin was expected to be 38%, and analysts expected 45.5%.
After the earnings report was released, Intel fell by more than 21% in pre-market trading on Friday.
Q3 revenue guidance is the highest decline of 11%, and EPS guidance has unexpectedly turned into a loss.
Intel's Q2 performance was far from Q1 and even worse than Wall Street's expectations. Q2 revenue declined instead of increasing, and EPS profits were only 20% of analysts' expectations, reflecting the indicator of manufacturing business efficiency, gross margin, which unexpectedly decreased. Intel's largest business in Q2, including revenue growth of the Client Computing and foundry businesses, slowed down, and the extent exceeded analysts' expectations. Revenue of data center and AI business decreased more than expected year-on-year.
Intel's Q3 performance guidance is worse than Wall Street's expectations. With the guidance range, Intel expects Q3 revenue to decrease by 4.9% to 11.2% year-on-year, while analysts expect an increase of about 1.3% year-on-year.
Intel expects Q3 EPS to turn into a loss of $0.03, while analysts expect EPS profit to decrease by 26.8% from $0.41 per share a year ago to $0.30 per share.
Intel's Q3 gross margin guidance continued to unexpectedly decline, falling 7.8 percentage points from 45.8% a year ago, a much larger decline than the 1.1 percentage point decline in Q2, while analysts only expect a 0.3 percentage point decline.
Intel has stated that it intends to significantly adjust the research and development/business of AI PC chips, which will harm gross profit margins. The gross profit margin is not expected to increase significantly next year.
Plans to reduce costs by $10 billion by 2025, with layoffs of around 150,000 people, mostly to be completed this year.
When announcing financial data, Intel also announced plans to "reduce expenses in all respects," including a layoff of more than 15%.
In the notice issued to employees, Intel CEO Pat Gelsinger revealed:
"We plan to achieve a $10 billion cost reduction in 2025, including layoffs of approximately 150,000 people, accounting for 15% of our total workforce. Most of the measures will be completed by the end of this year. "
The notice stated:
"In short, we must combine our cost structure with new operating models and fundamentally change the way we operate. Our revenue has not grown as expected- we have not fully benefited from powerful trends such as AI. Our costs are too high and our profits are too low. We need to take bolder action to solve these two problems- especially considering that our financial performance and prospects for the second half of 2024 are more difficult than previously expected."
According to Layoffs.fyi, an industry tracking website that has been operating since March 2020, Intel has created the largest single layoff ever.
Intel stated that after cutting expenditures, total capital expenditures in 2024 will be reduced by more than 20% from previous predictions to $25 billion to $27 billion, with net capital expenditures of $11 billion to $13 billion. The company aims to have total capital expenditures of $20 billion to $23 billion and net capital expenditures of $12 billion to $14 billion by 2025.
First suspension of dividends since 1992.
Intel also announced a new measure: suspending dividends from the fourth quarter of this year. Media reports pointed out that Intel has been paying dividends continuously since 1992, and this is the first time in the past 32 years that dividends have been suspended.
Intel stated that the company recognizes the importance of prioritizing liquidity in order to support the investments needed to implement its global strategy. Intel reiterated its commitment to providing competitive dividends in the long term as cash flow continues to improve to higher levels.
Editor/Lambor