Intel shares plunged the most in 50 years on Friday, hitting a price not seen since 2013, after the chipmaker reported a significant earnings miss and announced a massive restructuring. The stock plummeted 26% to close at $21.48, marking the second worst day ever for the shares, behind only a 31% drop in July 1974, three years after Intel’s IPO. The company’s market cap now stands below $100 billion.
The dramatic selloff contributed to a 2.4% drop in the Nasdaq and pulled down global semiconductor stocks. Taiwan Semiconductor Manufacturing Co. (TSMC) — the world’s largest chip manufacturer — closed 4.6% lower in Taiwan, and Samsung ended the session in South Korea down more than 4%. TSMC is the leading manufacturer of chips globally, while Samsung is the largest memory semiconductor firm.
Intel’s financial performance was poor across the board. The company swung to a $1.61 billion net loss, a stark contrast to the $1.48 billion net income reported in the year-earlier period. Adjusted earnings per share came in at 2 cents, well below the average analyst estimate of 10 cents, according to LSEG. Revenue also missed expectations.
As part of the restructuring, Intel announced it will not pay its dividend in the fiscal fourth quarter of 2024 and lowered its forecast for full-year capital expenditures by over 20%. Additionally, the company plans to lay off more than 15% of its workforce as part of a $10 billion cost-reduction plan.
“This is the most substantial restructuring of Intel since the memory microprocessor transition four decades ago,” said Intel CEO Pat Gelsinger in an interview Jon Fortt. “We have laid out an audacious journey of rebuilding this company, and we’re going to get that done.”
Key Points:
- Intel shares drop 26% to $21.48, the largest plunge in 50 years.
- Company reports a $1.61 billion net loss, missing revenue and earnings expectations.
- Intel announces a $10 billion cost-reduction plan, including laying off 15% of employees.
- Dividend payments halted for the fiscal fourth quarter of 2024.
- Global semiconductor stocks, including TSMC and Samsung, also suffer declines.
Intel’s decision to accelerate the production of Core Ultra PC chips capable of handling artificial intelligence (AI) workloads contributed to the recent financial loss, according to CEO Pat Gelsinger on a conference call with analysts. The company faced more competitive pricing than anticipated during the quarter, with rivals such as AMD and Qualcomm aggressively working to capture market share. Intel has significantly lagged behind its competitors in the AI sector.
The planned job cuts, the largest recorded by industry tracker Layoffs.fyi since its inception in March 2020, will predominantly occur this year, Gelsinger stated in a memo. This move is part of Intel’s broader restructuring strategy to revitalize the company and regain its competitive edge.
