Intel Investors Digest Earnings at Multiyear Highs

Jon C. Ogg

Intel Corp. (NASDAQ: INTC) has released its earnings for the third quarter of 2017. The processor and chip giant reported earnings per share (EPS) of $0.94 and revenue of $16.1 billion. What makes Intel harder to analyze ahead is not just that it has been changing its business mix to adapt to the years ahead. It was that Intel’s stock was at highs not seen since the tech bubble burst in 2000 coming into earnings.

Thomson Reuters had consensus estimates of $0.80 EPS and $15.73 billion in revenues. The results in the same period a year earlier were $0.80 EPS and $15.78 billion in revenues. Intel’s non-GAAP gross margin was 63.9% in the quarter, versus 64.8% a year earlier.

When Intel offered its prior guidance, that was as $15.0 billion to $16.2 billion in revenues and adjusted earnings of $0.75 to $0.80 per share.

Intel went on to say that revenue was up 6% year over year, excluding McAfee. Its data-centric businesses grew 15% year over year. The data center, Internet of Things and memory businesses all achieved record revenue.

Intel has become a harder company for Wall Street to analyze because of acquisitions. It has acquired Mobileye and Altera, and these change how Intel’s revenue streams look compared with just a decade ago. Here is a breakdown of each unit now for the third quarter of 2017, with notations on each:

  • Client Computing Group revenue of $8.9 billion was flat.
  • Data Center Group revenue of $4.9 billion was up 7%.
  • Internet of Things Group revenue of $849 million was up 23%.
  • Non-Volatile Memory Solutions Group revenue of $891 million was up 37%.
  • Programmable Solutions Group revenue of $469 million was up 10%.

Intel has now offered guidance as well. The chip giant has raised its full-year business outlook for the third consecutive quarter, with full-year revenue raised by $700 million to about $62 billion. Its full-year non-GAAP EPS was raised by $0.25 per share to $3.25.

Thomson Reuters has consensus estimates of $0.83 EPS and $16.11 billion in revenues for the fourth quarter, compared with results of $0.79 EPS and $16.37 billion for the fourth quarter of 2016.

Intel has been somewhat of a laggard among some of the major chip stocks until only recently, with many analysts and investors more focused on higher growth companies like NVIDIA. Intel’s stock hit a 52-week high of $41.58 on this same day, up from a 52-week low of $33.23. The Thomson Reuters consensus analyst target price was last seen at $40.80.

Intel closed up 1.4% at $41.35 immediately ahead of earnings, and its shares were indicated up 10 cents at $41.45 at first and then down four cents at $41.31 in the after-hours trading session. That trading indication may be quite different, up or down, by the time analysts chime in Friday morning.

Brian Krzanich, Intel’s CEO, said:

We executed well in the third quarter with strong results across the business, and we’re on track to a record year. I’m excited about our progress and our future. Intel’s product line-up is the strongest it has ever been with more innovation on the way for artificial intelligence, autonomous driving and more.

Bob Swan, Intel’s CFO said:

In the third quarter, we delivered record earnings, exceeded our EPS expectations, and increased our profit expectations for the full year. We feel great about Intel’s transformation and where we are nine months into our three year plan.