Intel drops on weak results for its data center group

Intel CEO Robert “Bob” Swan announces the chip group’s new microprocessors called “Tiger Lake” at the technology fair CES in Las Vegas on Jan. 7, 2020.

Christoph Dernbach | picture alliance | Getty Images

Intel shares fell as much as 10% in extended trading on Thursday after the company reported fiscal third-quarter earnings that were stronger than analysts had expected but showed new weakness in its data center business.

Here’s how the company did:

  • Earnings: $1.11 per share, adjusted, vs. $1.11 per share as expected by analysts, according to Refinitiv.
  • Revenue: $18.33 billion, vs. $18.25 billion as expected by analysts, according to Refinitiv.

Overall, Intel’s revenue in the quarter, which ended Sept. 26, declined 4% on an annualized basis, according to a statement. In the prior quarter revenue had increased 20%.

Intel’s Data Center Group came up with $5.91 billion in revenue, down 7% and less than the FactSet consensus estimate of $6.21 billion. Intel said revenue from enterprises and governments went down 47% after two quarters of growth above 30% because of the coronavirus pandemic, but cloud revenue in the quarter grew 15%. Average selling price across the division was 15% lower than in the year-ago quarter.

Intel’s largest business, the Client Computing Group that sells PC chips, produced $9.85 billion in revenue, up 1% year over year and above the $9.09 billion consensus among analysts polled by FactSet. Earlier this month technology research company Gartner estimated that PC shipments grew 3.6% in the third quarter, as people kept buying machines to work and study from home.

Intel’s Non-Volatile Memory Solutions Group had $1.15 billion in revenue, down about 11% and lower that the $1.50 billion consensus. On Tuesday South Korean memory maker SK hynix said it would buy part of that division, Intel’s NAND memory and storage business, for $9 billion.

Intel’s operating margin narrowed to 27.6% from 33.6% in the year-ago quarter. Operating margin for the Data Center Group reached 32%, down from 49%.

With respect to guidance, Intel said it expects $1.10 in adjusted earnings per share on $17.4 billion in revenue in the fiscal fourth quarter. The revenue forecast implies a decline of about 14%. Analysts polled by Refinitiv had been looking for $1.07 in adjusted earnings per share and $17.36 billion in revenue.

In the quarter Intel announced the departure of engineering leader Murthy Renduchintala and said McKinsey executive Safroadu Yeboah-Amankwah was joining as chief strategy officer.

During the quarter Intel did not announce progress on its goal of increasing the ranks of women and minorities in leadership positions. The company last issued statistics in December, saying that 72.6% of its global employees were male and that 61.2% of U.S. employees were White or Asian.

Excluding the after-hours move, Intel share are down about 10% since the beginning of 2020, while the S&P 500 is up 7%.

Shares of competing chipmaker AMD rose 2% in extended trading after the announcement.

This is breaking news. Please check back for updates.

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