August 2, 2024 - $Intel (INTC.US)$shares slumped 21.93% to $22.68 in pre-market trading on Friday. The company has released its financial results for the second quarter of 2024, which significantly underperformed relative to market forecasts. In response to these results, the company has taken decisive action by suspending its dividend distribution and implementing a workforce reduction of 15%.

Q2 Financial Results

• Revenue: Second-quarter revenue of $12.83 billion declined 1%YoY, while analysts were expecting $12.95 billion.

• EPS: Non-GAAP adjusted earnings per share (EPS) for the second quarter were $0.02, down 85% YoY and $0.10 expected by analysts.

• Gross margin: Adjusted gross margin for the second quarter was 38.7%, down 1.1 percentage points from the same period last year, compared with analyst expectations of 43.6% and 45.1% in the first quarter.

Intel Products Highlights

• CCG: CCG revenue was $7.41 billion in the second quarter, up 9% YoY, while analysts expected $7.53 billion.

• DCAI: DCAI revenue was $3.05 billion, down 3% YoY, while analysts expected $3.07 billion.

• NEX: NEX revenue was $1.3 billion in the second quarter, down 1% YoY and down 8% in the first quarter.

Q3 2024 Dividend

The company announced that its board of directors has declared a quarterly dividend of $0.125 per share on the company’s common stock, which will be payable Sept. 1, 2024, to shareholders of record as of Aug. 7, 2024.

As noted earlier, Intel is suspending the dividend starting in the fourth quarter.

Cost-Reduction Plan

As Intel nears the completion of rebuilding a sustainable engine of process technology leadership, it announced a series of initiatives to create a sustainable financial engine that accelerates profitable growth, enables further operational efficiency and agility, and creates capacity for ongoing strategic investment in technology and manufacturing leadership. These initiatives follow the establishment of separate financial reporting for Intel Products and Intel Foundry, which provides a "clean sheet" view of the business and has uncovered significant opportunities to drive meaningful operational and cost efficiencies. The actions include structural and operating realignment across the company, headcount reductions, and operating expense and capital expenditure reductions of more than $10 billion in 2025 compared to previous estimates. As a result of these actions, Intel aims to achieve clear line of sight toward a sustainable business model with the ongoing financial resources and liquidity needed to support the company’s long-term strategy.

Business Outlook

• Revenue: Third-quarter revenue is expected to be $12.5 billion to $13.5 billion, while analysts expect $14.38 billion.

• EPS: Third-quarter adjusted EPS loss is expected to be $0.03, while analysts expect EPS earnings of $0.30.

• Gross margin: Third-quarter gross margin is expected to be 38%, while analysts expect 45.5%.

 “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,” said Pat Gelsinger, Intel CEO. “These actions, combined with the launch of Intel 18A next year to regain process technology leadership, will strengthen our position in the market, improve our profitability and create shareholder value.”