On August 1, 2024, Intel Corp (INTC, Financial) released its 8-K filing detailing its second-quarter 2024 financial results. The company reported a revenue of $12.8 billion, a 1% decline year-over-year, and a GAAP loss per share of $(0.38). Non-GAAP earnings per share stood at $0.02, falling short of the analyst estimate of $0.07. The company also announced a comprehensive $10 billion cost reduction plan aimed at increasing efficiency and market competitiveness.
Company Overview
Intel Corp (INTC, Financial) is a leading digital chipmaker, focused on the design and manufacturing of microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors and was the prime proponent of Moore's law for advances in semiconductor manufacturing. Intel remains the market share leader in central processing units in both the PC and server end markets. Intel has also been expanding into new adjacencies, such as communications infrastructure, automotive, and the Internet of Things. Further, Intel expects to leverage its chip manufacturing capabilities into an outsourced foundry model where it constructs chips for others.
Performance and Challenges
Intel's second-quarter performance was impacted by several factors, including gross margin headwinds from the accelerated ramp of its AI PC product, higher than typical charges related to non-core businesses, and the impact from unused capacity. The company reported a gross margin of 35.4%, down from 35.8% in the same quarter last year. Operating margin also declined significantly, from (7.8)% to (15.3)%, reflecting the challenges faced by the company.
“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.
Financial Achievements
Despite the challenges, Intel achieved key milestones on Intel 18A with the 1.0 Process Design Kit (PDK) released and key power-on of first client and server products on Intel 18A, Panther Lake, and Clearwater Forest. The company generated $2.3 billion in cash from operations and paid dividends of $0.5 billion during the quarter.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Revenue ($B) | $12.8 | $12.9 | down 1% |
| Gross Margin | 35.4% | 35.8% | down 0.4 ppt |
| Operating Margin | (15.3)% | (7.8)% | down 7.5 ppts |
| Net Income (loss) Attributable to Intel ($B) | $(1.6) | $1.5 | n/m** |
| Earnings (loss) Per Share Attributable to Intel | $(0.38) | $0.35 | n/m** |
Balance Sheet and Cash Flow
Intel's balance sheet showed total assets of $206.2 billion, up from $191.6 billion at the end of 2023. The company reported cash and cash equivalents of $11.3 billion, a significant increase from $7.1 billion at the end of 2023. Short-term investments remained stable at $18.0 billion.
Business Unit Performance
Intel's Client Computing Group (CCG) reported revenue of $7.4 billion, down 9% year-over-year, driven by strong demand for AI PCs. The Data Center and AI (DCAI) segment saw a 3% decline in revenue to $3.0 billion, while the Network and Edge (NEX) segment reported a 1% decline to $1.3 billion. Intel Foundry revenue increased by 4% to $4.3 billion.
Outlook and Strategic Initiatives
Looking ahead, Intel is forecasting third-quarter 2024 revenue of $12.5 billion to $13.5 billion and expects a GAAP loss per share of $(0.24) and a non-GAAP loss per share of $(0.03). The company is implementing a comprehensive reduction in spending, including a more than 15% headcount reduction, to resize and refocus. Intel is also suspending its dividend starting in the fourth quarter of 2024 to prioritize liquidity and support strategic investments.
“By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet. We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders,” said David Zinsner, Intel CFO.
For more detailed information, readers can access the full 8-K filing.
Explore the complete 8-K earnings release (here) from Intel Corp for further details.
