Strong data center rebound drives Intel’s Q3 revenues to $19.2 billion

Intel reported its third-quarter earnings on Thursday, hitting Wall Street’s targets for financial performance.

The results come amid a variety of challenges, including rising competition from rival Advanced Micro Devices and concerns about how the poor U.S.-China trade relations will impact revenues for cross-border industries such as computers.

Intel reported on third-quarter revenues of $19.2 billion, driven by a 6% increase in data-centric revenue and a 5% drop in PC chip revenue, compared to a year earlier. Adjusted earnings per share hit $1.42, up 1%, while GAAP earnings per share amounted to $1.35.

Intel’s stock price rose in after-hours trading to $54.82 a share.

Analysts expected Intel to report $1.23 in adjusted earnings per share, down from $1.40 in the same period last year. Analysts also expected Intel to report $18.05 billion in sales, down about 6% and in line with management’s expectations.

Intel has been dealing with weakness in its data center business. In the second quarter, that business saw a 10% drop for sales of chips for data centers. Intel is also battling Nvidia and others to produce chips that accelerate artificial intelligence functions.

Meanwhile, at the Linley Fall Processor Conference in Santa Clara, California, Intel unveiled its Tremont microarchitecture for a future family of low-power, x86-based processors.

Tremont delivers significant IPC (instructions per cycle) gains gen-over-gen compared with Intel’s prior low-power x86 architectures. This was the sort of gain that enabled AMD to jump ahead with its Zen and Zen 2 architectures, and it represents Intel’s answer to that competition.

Designed for enhanced processing power in compact, low-power packages, Tremont-based processors will enable a new generation of innovative form factors for client devices, creative applications for the internet of things (IoT), efficient data center products, and more.

When combined with other technologies across Intel’s broader IP portfolio, this architecture will enable a new generation of products. Using Intel’s 3D packaging technology Foveros, Tremont is integrated within a wider set of silicon IPs in Lakefield, which will power breakthrough innovative devices like the recently announced dual-screen Microsoft Surface Neo.

Intel has generated $23.3 billion in cash from operations this year and paid out $14.3 billion to shareholders.

Intel is raising its full-year guidance for revenue to $71 billion, up $1.5 billion from its previous estimate in July. It expects non-GAAP EPS of $4.60.

“We’ve been on a multiyear journey to reposition Intel’s portfolio to take advantage of the exponential growth of data,” said Bob Swan, CEO of Intel, in a statement. “Our third-quarter financial performance underscores our progress as our data-centric businesses turned in
their best performance ever, making up almost half our total revenue in a record quarter. Our priorities are accelerating growth, improving our execution and deploying capital for attractive returns. We now expect to deliver a fourth record year in a row.”

Intel today announced its board of directors has approved a $20 billion increase in its stock repurchase program authorization.

The company’s PC-centric revenue in the Client Computer Group was $9.7 billion, down 5%. The data center group revenue was $6.4 billion, up 4%. Internet of things generated $1 billion in revenue, up 9%. Mobileye revenue was $229 million, up 20%. Intel’s memory business generated $1.3 billion, up 19%, and programmable chips hit $507 million, up 2%.

The PC business suffered from lower volume, offset by a strong mix of high-performance products and a strong commercial segment. Intel said 18 new Ice Lake-powered systems have shipped so far, and a total of 30 will debut by the end of the year. PC sales are expected to drop 2% in 2019, according to market researcher IDC.

The data center group saw record revenue with a mix of high-performance Xeon processors and growth in every subsegment. Communications service provider segment was up 11%, while cloud was up 3%. Enterprise and government revenue were both up 1%.

In an email, Patrick Moorhead, analyst at Moor Insights & Strategy, said, “Intel had an incredible Q3, well ahead of estimates for revenue. Every business increased from prior quarter, except the PC Group. MobilEye and the memory group were up big time, 20% and 19% respectively demonstrating automotive growth and memory pricing stability. I believe the biggest breakthrough was the data center group for growth in the second half, which had been promised and many dismissed. Even enterprise grew. It appears that only around 10% of the revenue ‘beat’ was China buy-aheads, so 90% was real growth, a very good sign. Competitively it appears that both AMD and Intel can both win in a growing market.”