Why Intel Stock Is Down Today

Wrestling Intel (INTC -28.03%) is getting crushed in Friday trading. The company’s stock price was down 29% as of 10:30 a.m. ET today, according to data from S&P Global Market Intelligence.

Intel reported second-quarter results after the market closed yesterday, with sales and profits falling short of Wall Street expectations. To make matters worse, the semiconductor company also issued a weak outlook, announced extensive layoffs and said it would suspend its dividend.

A disastrous quarter

Intel reported adjusted earnings per share of $0.02 for the second quarter on sales of $12.83 billion. The results were well below analysts’ average estimates of $0.10 per share on revenue of $12.98 billion.

Intel’s results were deeply disappointing and came on the back of more bad news. The company will lay off 15% of its workforce as part of a broad cost-cutting drive. It will also suspend its dividend for the fourth quarter.

Intel is clearly in turnaround mode, looking for ways to cut costs and become a leaner operating machine. Suspending its dividend to refocus capital on driving sustainable growth could pay dividends down the road, but investors clearly hate the move. The scope of the upcoming layoffs also raises some big questions.

Many tech companies have implemented significant job cuts in recent years, but the scope of the upcoming reduction at Intel is significant. As the company tries to reposition itself to capitalize on the rise of artificial intelligence (AI) and other big trends, laying off so many employees raises questions about its competitive position. At the very least, it suggests that management believes the company has significant overstaffing in areas that aren’t poised to perform well.

Intel Issues Dire Guidance

For the third quarter, Intel is forecasting sales of $12.5 billion to $13.5 billion. Before the company’s update, the average Wall Street target was for the company to post sales of $14.39 billion for the period.

The chip specialist’s earnings outlook was even more concerning. The company is expected to report an adjusted loss of $0.03 per share in the third quarter. That compares with the average analyst estimate for adjusted earnings of $0.30 per share in the period.

Investors had been hoping the company would see higher sales and higher margins thanks to its AI-enabled computers and data centers, but it looks like those expected catalysts won’t materialize anytime soon.