On August 1, Intel released its financial results for the second quarter of fiscal year 2024, ending June 30, and simultaneously unveiled a comprehensive cost-cutting plan aimed at enhancing efficiency and competitiveness. Despite facing a challenging market environment, Intel is making strategic moves to secure its position in the semiconductor industry.

Intel's Q2 revenue reached $12.8 billion, a 1% decline from the previous year, falling short of market expectations of $12.94 billion. The company's gross margin also saw a slight dip, registering at 35.4%, down from 35.8% in the same period last year.

Breaking down the performance by business unit:

• Data Center and AI Group: Revenue for this segment was $3.045 billion, down 3% from $3.155 billion in the same quarter last year. This decline reflects ongoing competition and pricing pressures in the data center market.
• Network and Edge Group: The division generated $1.344 billion in revenue, a 1% decrease from $1.364 billion year-over-year, highlighting the slow growth in network infrastructure investments.
• Intel Foundry Services (IFS): This segment showed resilience, with revenue increasing by 4% to $4.3 billion, driven by growing demand for Intel's manufacturing services.
• Other Business Units: Revenue fell sharply by 32% to $968 million, compared to $1.419 billion in the previous year, reflecting challenges in non-core segments.

Additional highlights include:

• Altera (FPGA Division): Revenue dropped significantly by 57% to $361 million, underscoring the tough competition in the FPGA market.
• Mobileye (Autonomous Driving Division): Revenue was $440 million, a 3% decline year-over-year, indicating slower adoption of autonomous driving technologies.
• Other Segments: Revenue increased by 43% to $167 million, driven by growth in emerging technologies and services.

Looking ahead to the third quarter of 2024, Intel projects revenue to range between $12.5 billion and $13.5 billion. In response to the challenging market conditions, Intel has announced an aggressive cost-cutting initiative, including a workforce reduction of over 15%. This is part of a broader effort to resize and refocus the company’s operations.

Intel aims to reduce its non-GAAP research and development, marketing, general, and administrative expenses to approximately $20 billion by the end of 2024, with further reductions to around $17.5 billion by 2025. By 2026, additional cost-cutting measures will be implemented to optimize operations further.

The company expects net capital expenditures to be between $11 billion and $13 billion in 2024, with a target of total capital expenditures between $20 billion and $23 billion in 2025, and net capital expenditures between $12 billion and $14 billion.

Intel has also announced a suspension of dividend payments starting from Q4 2024, a move that will continue until the company’s cash flow reaches a sustainable higher level. This decision is expected to positively impact Intel's competitiveness by allowing the company to reinvest in critical growth areas.

CEO Pat Gelsinger emphasized that the second half of the year will be more challenging than initially anticipated. "We are taking decisive actions under our new operating model to enhance operational and capital efficiency while accelerating our IDM 2.0 transformation," said Gelsinger. He also noted that the introduction of the Intel 18A process technology in 2025 will be a key factor in reclaiming the company’s leadership in process technology, ultimately strengthening Intel's market position, profitability, and shareholder value.

Intel is currently accelerating the development of new AI PC chips at the Intel 18A process node. While this development is impacting current profits, it is seen as a crucial investment for future growth. Intel’s goal is to maintain its leadership in the AI PC market, a segment expected to drive significant demand in the coming years.