Marrakech – In a startling memo to employees on Thursday, Intel announced it would cut 15,000 jobs, the equivalent of over 15% of its workforce.
Following a disappointing second-quarter earnings report, this sweeping reduction is part of a strategic plan to trim $10 billion in spending by 2025, the company said.
“Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” CEO Pat Gelsinger shared in the memo.
He added that the company’s costs are climbing, and the margins are shrinking, noting: “We need to take more drastic measures to tackle both issues, especially considering the challenging financial outlook for the second half of 2024.”
According to Gelsinger, Intel has struggled to ride the AI wave as successfully as rivals like Nvidia.
While Intel pioneered the tech industry’s CPU revolution about 25 years ago, it has lagged in adapting to newer computing trends like smartphones and AI.
Gelsinger highlighted a $24 billion drop in annual revenues from 2020 to 2023, despite a 10% increase in workforce during the same period.
This stands in sharp contrast to other chipmakers who have seen their revenues and valuations skyrocket amidst the AI boom.
Intel has reported a 1% revenue decline for the second quarter compared to last year, blaming the drop on gross margin challenges with its AI PC products.
Adding to the financial shake-up, the company will suspend its shareholder dividend starting in the fourth quarter of 2024.
Intel also foresees “more challenging” trends in the second half of the year than previously anticipated.
Beyond the layoffs, Intel will roll out a “voluntary departure” program for employees next week, according to the memo.
The company is also introducing an enhanced retirement package for eligible employees as part of its restructuring efforts.
