On August 2nd Beijing time, Intel released its second quarter financial report, with revenue of 12.8 billion US dollars, a year-on-year decrease of 1%, and basically unchanged month on month; Under GAAP (Generally Accepted Accounting Principles), Intel incurred a net profit loss of $1.6 billion, compared to a net profit of $1.5 billion last year. Intel has suffered losses for two consecutive quarters.
Our second quarter financial performance was disappointing, despite achieving key milestones in product and process technology. The trend in the second half of the year is more challenging than we previously expected, and we are taking decisive action to improve operational and capital efficiency while accelerating the IDM 2.0 transformation using our new operating model, "said Intel CEO Pat Gelsinger." These actions, along with the launch of the Intel 18A next year, will enable us to regain leadership in process technology, strengthen our market position, and improve profitability
On the one hand, in terms of performance, although Intel is accelerating the advancement of chip technology nodes, its performance this quarter is poor. Affected by this, as of the close of the day, the company's stock price fell 5.5% to $29.05 per share, with a market value of $123.7 billion.
Overall, Intel's wafer foundry division generated revenue of $4.3 billion, up 4% year-on-year; The overall revenue of the product department was $11.8 billion, a year-on-year increase of 4%; Altera, which has become independent, had revenue of $361 million, a year-on-year decrease of 57%, while Mobileye had revenue of $440 million, a decrease of 3%.
Among them, the Client Computing Group (CCG) in Intel's product division generated revenue of $7.4 billion, a year-on-year increase of 9%; The revenue of the Data Center and Artificial Intelligence Division (DCAI) was $3 billion, a year-on-year decrease of 3%; The Network and Edge Business Unit (NEX) generated revenue of $1.3 billion, a decrease of 1%.
Intel's total revenue for this quarter only fluctuated by 1%, but due to the ongoing investment in the foundry industry, Intel is operating at a loss, with a quarterly operating loss of $2.8 billion for its foundry business. Previously, Intel stated that by the end of 2030, Intel's foundry is striving to achieve a breakeven operating profit margin, with operating losses expected to peak in 2024. The goal is to achieve a gross profit margin of 40% and an operating profit margin of 30% by the end of 2030.
Meanwhile, Intel's Chief Financial Officer David Zinsner stated, "The results for the second quarter were affected by the pressure on gross profit margins brought about by the accelerated launch of AI PC products, higher than expected expenses related to non core businesses, and the impact of idle capacity
Intel expects its revenue for the third quarter of 2024 to be between $12.5 billion and $13.5 billion, with a GAAP loss of $0.24 per share. The forecast also shows the pressure that Intel will face in the coming quarters.
On the other hand, in response to ongoing market challenges and internal transformation needs, Intel has announced a series of comprehensive cost reduction plans. Intel plans to reduce costs by over $10 billion by 2025 through architectural and operational restructuring, layoffs, cuts in operating expenses and capital expenditures.
Intel expects to lay off over 15% of its workforce by the end of 2024 in terms of streamlining operations and personnel costs. And R&D under non GAAP standards will be included; D、 The general and administrative (MG&A) expenses will be reduced to approximately $20 billion in 2024 and $17.5 billion in 2025, with further reductions expected in 2026.
In terms of capital expenditure, Intel's total capital expenditure for 2024 is expected to decrease by more than 20% compared to previous forecasts, to between $25 billion and $27 billion, with net capital expenditure expected to be between $11 billion and $13 billion.
In terms of sales costs, Intel expects to reduce $1 billion in non variable sales costs by 2025. Although the product portfolio will continue to face challenges in the coming year, these measures are expected to have a positive impact on gross profit margins in 2025. At the same time, Intel will continue to promote technological innovation and maintain investments in establishing sustainable semiconductor supply chains in the United States and globally.
In addition, Intel has suspended its dividend payments since the fourth quarter as it prioritizes liquidity to support the investments needed to execute its strategy. As cash flow improves to a sustainable higher level, Intel stated that it will maintain competitive dividends.
David Zinsner said, "We are taking proactive measures to improve our profits and strengthen our balance sheet. This will enable us to make the right investments and create long-term value for our shareholders
Despite facing numerous challenges, Intel has made significant progress in its core technology areas. Intel will complete its promised "four years and five nodes" strategy by 2025, with the Intel 18A expected to be ready for production by the end of this year and begin wafer production in the first half of 2025.
In July 2024, Intel released the 1.0 version Process Design Kit (PDK) for Intel 18A to its OEM customers. The first two Intel 18A products, Panther Lake for clients and Clearwater Forest for servers, are expected to be launched in 2025.
In the crucial chip manufacturing department, Intel appointed Kevin OBuckley in May to lead the foundry business, after previously working at Marvel. Recently, we have hired a new executive from Micron, Naga Chandrasekaran, to be responsible for Intel's OEM manufacturing and supply chain. Faced with competition from TSMC and Samsung in wafer foundry, whether Intel can regain its position in 2025 after changing its main players is also highly concerned.
However, market competition is becoming increasingly fierce, especially in the fields of artificial intelligence and high-performance computing. Intel's main competitors, such as AMD and NVIDIA, have made progress in technological innovation and market share in recent years, especially NVIDIA's strong performance in the artificial intelligence accelerator and high-performance computing markets, putting pressure on other chip manufacturers.
Currently, Intel is at a critical and difficult turning point, aiming to achieve growth in the coming years by strengthening operational efficiency, optimizing capital expenditures, and maintaining investment in core technologies.