Author: Zhou Yuan/Wall Street News
"If this continues, no one will remember Intel soon." The research director of a US dollar fund told Wall Street.
On August 1, California time, United States, Intel released its financial report for the second quarter of fiscal year 2024, showing that Intel's revenue in the second quarter was $12.833 billion (lower than market expectations of $12.94 billion), down 1% year-on-year; Net loss was US$1.654 billion, compared to net profit of US$1.473 billion in the same period in 2023, a year-on-year loss, and gross margin of 35.4%, down from 35.8% in the same period of 2023, and gross margin of 41% in the first quarter of 2024.
On the same day, Intel's stock price fell 5.5% to close at $29.05 per share; After the U.S. stock market, Intel shares fell 18.90%.
Intel CEO Pat Gelsinger (Pat Gelsinger) analyzed that "the second-quarter performance was lower than expected, partly due to the company's decision to accelerate production of Ultra AI PC CPU." The investment in defining and driving the AI PC category will put a lot of pressure on margins in the short term, but we weigh it and think it's worth it. AI PCs will grow from less than 10% of the market share today to more than 50% by 2026. Investing now will bring us significant growth in the coming years. ”
According to the new business structure adopted in the first quarter of 2024, Intel's business is divided into three main segments: Client Computing Group (CCG), Data Center and Artificial Intelligence Group (DCAI), and Network and Edge Group (NEX). These three parts are collectively referred to as "Intel Products"; Intel Foundry business is separated; Altera (formerly Intel's Programmable Solutions Group), Mobileye, and others are collectively referred to as "All Others."
In the second quarter, the revenue of Intel's three product businesses was $7.41 billion (up 9% year-on-year), $3.05 billion (down 3% year-on-year) and $1.3 billion (down 1% year-on-year). Revenue accounted for 57.74%, 23.77% and 10.13% respectively.
Among them, the growth of the CCG business is mainly due to the fact that more than 15 million AI PCs have been shipped since December 2023, and more than 40 million units are expected to be shipped by the end of 2024.
Intel Foundry's revenue reached $4.32 billion, a year-on-year increase of 4%, accounting for 33.66% of total revenue; The revenue of all other businesses was US$968 million, a year-on-year decrease of 32%, accounting for 7.54%; Among them, Altera achieved revenue of $361 million, down 57% year-on-year, and Mobileye's revenue was $440 million, down 3% year-on-year.
Kissinger also expressed disappointment: "Despite the fact that we reached key product and process technology milestones, our financial performance in the second quarter was disappointing. Our revenue isn't growing as much as we expected, and we're not fully benefiting from strong trends like artificial intelligence. Our costs are too high, our profits are too low. ”
Of course, as the top leader, Kissinger did not forget to boost morale, saying, "[Although] the market trends in the second half of the year will be more challenging than expected, we are taking decisive action to leverage the new operating model to improve operational and capital efficiency and accelerate the IDM 2.0 transformation." ”
Gelsinger believes that these initiatives, along with Intel's 18A process technology to be launched in 2025, will help Intel regain its leading position in process technology, strengthen its market advantage, improve profitability, and create shareholder value.
But the current facts may still require Intel to continue to suffer.
At the same time as the release of the second quarter 2024 financial report, Intel also announced a $10 billion cost reduction plan (to be completed in 2025) to start a global "slimming" of 15% of the workforce (to be completed by the end of 2024), which is the largest layoff in Intel's 56-year history. As of June 29, Intel (excluding certain subsidiaries) had a total of 116,500 employees. Based on the 15% layoff, Intel will lay off at least 17,000 employees this time.
What's more, for the first time since 1992, Intel will suspend its dividend payouts starting in the fourth quarter of 2024 (until cash flow improves to a sustainably high level) because of the poor market performance in the second quarter.
Kissinger explained, "We have to align our cost structure with the new operating model, and we have to fundamentally change the way we operate. ”
Intel's outlook for the third quarter of this year also disappointed. Intel expects revenue of $12.5 billion to $13.5 billion in the third quarter of 2024, well below analysts' expectations of $14.38 billion.
Intel relies on the main products CPU, the company just announced at the end of July, the company will launch the company's most powerful AI acceleration card in the fourth quarter of this year Gaudi 3 (TSMC 5nm process), which is Intel's entire AI server accelerator card, Intel has not launched any other AI accelerator chips.
The Gaudi 3 will be used as Intel's flagship server AI acceleration card, benchmarking against NVIDIA's flagship Hx00 Hopper architecture AI acceleration card.
However, because the Gaudi 3 is scheduled to be launched in the fourth quarter, the forecast revenue size is only $500 million, which is not only not comparable to NVIDIA, but also far less than the $4.5 billion (full year 2024) revenue generated by AMD's MI300 series AI accelerator cards.
Technically, Gaudi 3 oddly only integrates HBM2e, rather than the more advanced, current mainstream HBM3 or HBM3e. Therefore, the highest capacity stack available for Gaudi 3 is 16GB, and the 8-layer stack adds up to a total of 128GB of memory capacity. This is generally a "helpless choice" when there is no choice, but Intel is obviously not limited in any way, why only use HBM2e?
This shows that Intel's internal organizational mechanism is too slow to respond and adjust too slowly, and it has not been able to seize the market opportunity after the release of ChatGPT-3.5 (about November 30, 2022, one says that it will be released on January 23, 2023), and the technology has not turned quickly, and even in 2024, it is difficult to see the technology and product advantages in the AI field regain the same technology and product advantages in the CPU industry as it did back then.
For Intel, there is really not much time left for them.
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