Intel stock plunges on layoffs and earnings report, sinking AI chip stocks Nvidia, TSMC, and ARM too

Shares in Intel Corporation (ticker: INTC) are trading sharply lower in premarket this morning after the chip giant posted disappointing Q2 earnings yesterday, as well as announcing a massive round of layoffs to get its costs under control. As of the time of this writing, Intel shares are down over 20% in premarket trading.

Intel’s share price drop adds to a mixed bag this week when it comes to chip stocks. But many of those chip stocks appear to be being dragged lower today after Intel’s latest financials. Here’s what you need to know about Intel’s earnings and its announced layoffs.

Intel Q2 2024 earnings

There’s no doubt that Intel’s earnings were a disappointment for its second quarter of fiscal 2024. Total net revenue for the quarter was $12.8 billion, down 1% year-over-year. As CNBC notes, LSEG analyst estimates expected Intel to post net revenue of $12.94 billion.

Adjusted earnings per share were also just 2 cents, when 10 cents was expected. In total, the company has a $1.61 billion net loss for the quarter. That’s down from a $1.48 billion net income in the same quarter a year earlier.

Intel’s leadership was blunt when it came to the disappointing quarter. Intel CEO Pat Gelsinger said, “Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation.”

Intel’s CFO David Zinsner acknowledged that part of the disappointing results was down to the company accelerating the ramp-up of its AI PC chip offerings, which hurt the company’s bottom line.

In order to help turn things around, the company said it is focusing on its “multiyear transformation strategy,” which includes four key parts: reducing capital expenditures, reducing cost of sales, maintaining core investments to support its supply chains, and reducing operating costs.

That last point brings us to the most disappointing news from Intel’s earnings announcement: layoffs.

Intel to lay off around 15,000 workers

Undoubtedly the worst news to come out of Intel’s financial results yesterday is that the company is planning to cut “roughly” 15,000 roles in an effort to help implement its “multiyear transformation strategy” and reduce operating costs.

15,000 jobs equate to about 15% of Intel’s total global workforce.

In a memo sent to employees, CEO Gelsinger didn’t mince words. “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” Gelsinger wrote. “Our revenues have not grown as expected—and we’ve yet to fully benefit from powerful trends, like AI. 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.”

Those “bolder actions” include the elimination of around 15,000 roles. Gelsinger said the company will offer an application program to incentivize voluntary departures, as well as roll out an “enhanced retirement offering” for employees who are eligible.

Still, the majority of the job reductions are likely to come from nonvoluntary job eliminations. Intel expects the majority of the job cuts to be completed by the end of 2024. It says they will help contribute to a cost savings of $10 billion in 2025.

Intel’s share price drop leads other chip stocks lower

The chip industry has a handful of major players, Intel being one of them. And when one of the semiconductor giants has bad news, many times it tends to drag the shares of other chip giants lower, too.

That seems to be what has happened in premarket trading this morning. While Intel shares are down over 20% as of the time of this writing, other major chip stocks are also taking a beating, to a lesser degree.

As of the time of this writing, shares in NVIDIA Corporation (ticker: NVDA) are currently down 3%, Taiwan Semiconductor Manufacturing Company (ticker: TSM) is down over 4%, Arm Holdings (ticker: ARM) is down over 4.5%, and chip equipment maker ASML Holding (ticker: ASML) is down over 6.7%.

Still, the companies listed above have had a pretty good year so far with returns of between 16% and 120% since the start of the year. Intel, however, has had a bad year. Before today’s premarket drop, its stock price already declined over 42% since January.

And things don’t look much better for Intel’s immediate future. Another reason the stock is falling this morning is because investors did not like the guidance it is forecasting for its current Q3 2024. The company said it expects between $12.5 billion and $13.5 billion in revenue. As noted by CNBC, LSEG analysts expected revenue guidance of around $14.35 billion.

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