‘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. These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career,’ writes Intel CEO Pat Gelsinger in an open letter to employees.

Semiconductor giant Intel Thursday said it would lay off more than 15 percent of its workforce as part of a plan that’s aimed at reducing costs by over $10 billion in its fiscal 2025.

The plan, unveiled along with the Santa Clara, Calif.-based chipmaker’s second fiscal quarter 2024 financials, includes the elimination of roughly 15,000 jobs, large cuts in operating and capital expenses, and suspension of the company’s dividend starting in the fourth quarter. The majority of these cuts will be completed by the end of this year, Intel CEO Pat Gelsinger said.

“This is painful news for me to share,” wrote Gelsinger in an open letter to Intel employees posted on the company website. “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.”

The news comes the same day that Intel reported second-quarter revenue of $12.8 billion, down 1 percent year over year. Intel stock plummeted more than 18 percent in after-hours trading Thursday to $23.75 a share. The stock has fallen by nearly 40 percent this year. Intel’s total market cap Thursday stood at $121.21 billion compared with Nvidia’s total market cap of $2.38 trillion and AMD’s $205 billion.

[Related: Intel’s 9 Biggest Moves Under Pat Gelsinger In His First 3 Years As CEO]

“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones,” Gelsinger said in a statement. “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. 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.”

Gelsinger wrote that Intel has to align its cost structure with its new operating model and fundamentally change how it operates.

“Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI,” he wrote. “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. These decisions have challenged me to my core, and this is the hardest thing I’ve done in my career.”

In addition to the layoffs, Intel is planning to make several other changes to realign its costs.

This includes:

• Reducing operating expenses, which in addition to the layoffs includes reducing non-GAAP R&D and MG&A (marketing, general, and administrative) to about $20 billion in 2024 and about $17.5 billion in 2025. More cuts are expected in 2026.
• Reduce capital expenditures, including gross capital expenditures in 2024 by 20 percent from prior predictions. Intel said it can do so because it has neared the end of its five-nodes-in-four-years program. That will make 2024 gross capital spending to between $25 billion and $27 billion, and between $20 billion and $23 billion in 2025.
• Reduce cost of sales, which is expected to save $1 billion in non-variable cost of sales in 2025.

The chief technology officer of an SP500 company, who did not want to be identified, said the job cuts and the latest financial results are yet another sign of the intense pressure Intel is facing from both Nvidia and AMD.

“Frankly it’s difficult in this highly dynamic and fast-moving AI market where innovation and discoveries are happening on a near daily basis for Intel to keep up,” said the CTO. “Conversely this potentially gives Intel the financial resources to reenergize and refocus on the right areas for the future. Customers still want and highly value Intel and even when there are challenges Intel has continued to innovate and evolve. Hopefully this restructuring will springboard them into a new wave of growth.”

The CTO said it is always disappointing to see large staff reductions from an industry icon like Intel.

“It’s always difficult to learn that so many people’s lives are affected because of the downward pressure this industry can place on technology companies to stay current with the rapid nature of innovation and development,” he said.

Steve Burke contributed to this story.