Intel to Cut 15,000 Jobs Amid 85% Profit Decline, Lagging Behind AMD and Nvidia

Intel will cut 15,000 positions after an 85% profit drop in Q2. It is trailing AMD and Nvidia in AI chip sales. Increased investments in next-gen chips and facilities have strained its financials, but the company aims for future growth.

Intel to Cut Workforce by 15,000 After Q2 Profit Plunges 85%, Trailing AMD's AI Chip Success

Intel announced on August 1 that it intends to eliminate 15,000 positions following an 85% year-over-year decrease in second-quarter profits. According to Nikkei Asia, this announcement occurred two days after AMD's impressive earnings, bolstered by robust AI chip sales, were disclosed.

Intel has strategically increased its expenditures on developing next-generation chips and constructing its fabrication facilities in response to the intensifying competition from AMD and Nvidia in the competitive market for chips that power artificial intelligence. This strategic move has resulted in a decline in its financial performance, but it positions the company for future growth.

Intel's revenue for the three months ending June 29 was $12.8 billion, a 1% decrease from the previous year. Net income decreased by 85% to $83 million.

In contrast, AMD disclosed on July 30 that its revenue increased by 9% to $5.8 billion. The driving force behind this success was the strong AI data center processor sales, which led to a 19% increase in net income to $1.1 billion, showcasing the company's strength in this market.

In extended trading on August 1, Intel shares were down 20% from the day's closing price. AMD and Nvidia experienced a modest increase in value.

Intel to Cut 15,000 Jobs and Implement $10 Billion Cost Savings Plan to Boost Efficiency Amid Struggles in AI Market

In a news release, Intel CEO Pat Gelsinger said, "Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones." Chief Financial Officer David Zinsner blamed the weak quarter on "the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses, and the impact from unused capacity."

AMD and Intel have been vying for the second position and placing bets on AI-enabled PCs as Nvidia continues to expand its lead in AI processors. However, AMD's sales have experienced significantly more robust growth in recent quarters.

In 2025, Intel intends to “increase efficiency and market competitiveness” by implementing a $10 billion cost savings plan that includes a 15% reduction in its workforce, or approximately 15,000 employees. This bold move demonstrates the company's commitment to improving its financial performance and market competitiveness.

"Our revenues have not grown as expected -- and we've yet to fully benefit from powerful trends, like AI," Gelsigner explained in a note to employees on August 1.

"Our costs are too high, our margins are too low," he continued. "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."