It’s not great news for Intel shareholders as the chip-maker posted underwhelming results last night, coupled with even weaker guidance for Q4. While the company just barely scraped ahead of analysts’ estimates, investors expected a lot more in an industry where its main competitor, Advanced Micro Devices (AMD), has been consistently posting impressive growth quarter after quarter.
Intel’s Q3 Highlights
|Q3 Performance||Analysts’ Expectations||Q4 Guidance|
|Revenue: $18.33 billion||Revenue: $18.25 billion||Revenue: $17.4 billion|
|EPS: $1.11||EPS: $1.11||EPS: $1.10|
Expanding on these numbers:
- Revenue from its datacenter operations was $5.91 billion, down 7% from last year.
- Enterprise and government revenue fell 47%.
- Operating margin fell to 27.6% from 33.6% last year, with data-center operating margin falling 17% from last year to 32%.
- The one flickering light in this report is that cloud revenue was up 15% in the past year.
While the report makes for some grim reading, possibly the most pertinent figure here is the figure of $17.4 billion that Intel executives have forecasted for revenue next quarter, a 14% drop year over year. From this, data center revenues are expected to fall 25%, indicating Intel’s loosening grip on the market as AMD expands its operations with more advanced technology.
In an effort to shore up its balance sheet, Intel is selling a part of its NAND memory and storage business to South Korean company SK hynix for $9 billion. This sale, juxtaposed with the consolidation currently happening in the CPU industry (AMD in talks to buy Xilinx and Nvidia acquiring Arm), further brings into question Intel’s growth story going forward. The stock was down 11% for the year at close of business yesterday, while it’s currently down 10% in after-hours trading at time of writing.
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Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.