As rumored, Intel has announced another round of job cuts, with CEO Pat Gelsinger saying the company will reduce its headcount by some 15,000 roles.

Bloomberg reported Wednesday that Intel was preparing to announce layoffs that would impact thousands of employees. In a memo to employees Thursday, Gelsinger confirmed the jobs cuts, saying the company is trying to cut $10 billion in costs in 2025.

We plan to deliver $10 billion in cost savings in 2025, and this includes reducing our head count by roughly 15,000 roles, or 15% of our workforce. The majority of these actions will be completed by the end of this year.

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Gelsinger acknowledged that the news was difficult, both to deliver and to hear.

This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history. When we meet in a few hours, I’ll talk about why we’re doing this and what you can expect in the coming weeks. In advance of that, I wanted to preview some of what’s on my mind.

Gelsinger went on to say the layoffs were necessary because the company’s revenues have been disappointing and its investments in new technology, like AI, has not yet paid off.

Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.

For example, our annual revenue in 2020 was about $24 billion higher than it was last year, yet our current workforce is actually 10% larger now than it was then. There are a lot of reasons for this, but it’s not a sustainable path forward.

Beyond our costs, we need to change the way we operate – something many of you shared as part of our Employee Experience Survey. There’s too much complexity, so we need to both automate and simplify processes. It takes too long for decisions to be made, so we need to eliminate bureaucracy. And there’s too much inefficiency in the system, so we need to expedite workflows.

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Gelsinger did say the company is focused on eliminating the jobs in the right way, where possible giving eligible employees the option to retire, while setting up a voluntary departure process.

Next week, we’ll announce a companywide enhanced retirement offering for eligible employees and broadly offer an application program for voluntary departures. I believe that how we implement these changes is just as important as the changes themselves, and we will adhere to Intel values throughout this process.

Disappointing Quarterly Results

The announcement comes on the heals of another disappointing quarter for Intel. The company’s revenue was down 1% from the year-ago quarter, a loss per share of $0.38, and plans to suspend dividends in Q4 2024.

“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 Gelsinger. “These actions, combined with the launch of Intel 18A next year to regain process technology leadership, will strengthen our position in the market, improve our profitability and create shareholder value.”

“Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses and the impact from unused capacity,” said David Zinsner, Intel CFO. “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.”

Gelsinger has staked his reputation on turning Intel around and returning the chip company to its former glory. Those plans have taken one hit after another, with the announced job cuts merely the latest challenge.