The Cloud

Intel Earnings Beat Estimates

But concern arises about slowing momentum in the semiconductor maker's data-center division.
Matthew HellerJanuary 15, 2016
Intel Earnings Beat Estimates

Intel reported fourth-quarter results that beat analysts’ estimates, but a decline in the growth rate of its data-center business raised concerns about its “post-PC” strategy.

The chip maker said Thursday its profit fell 1% to $3.61 billion, or 74 cents a share, while revenue rose 1% to $14.9 billion, showing growth after two quarters of declines. Analysts polled by Thomson Reuters had expected earnings of 63 cents a share on revenue of $14.8 billion.

PC chip revenue declined 1%, which, according to the Wall Street Journal, was a strong showing in view of recent reports about sharp declines in laptop and desktop machines.
But revenue from the data-center group — which includes sales of chips for servers — rose only 5% in the period ended in December. Sales for the division had risen 12% in the third period, and most analysts had expected double-digit percentage gains to continue.

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“It renews concerns about the sustainability of the company’s recent momentum,” Bill Kreher, an analyst at Edward Jones, told the WSJ.

Intel CFO Stacy Smith said the slowdown did not reflect any fundamental change in demand, but the company’s shares fell 5% to $31.15 in after-hours trading Thursday.
Fourth quarter gross margins came in at 64.3%, compared with 65.4% from the previous year. Intel expects gross margins of 58% in first quarter 2016.

As PC sales continue to decline globally, Intel has been in the midst of a transition to a new generation of products including servers, memory chips, and the Internet of Things. CEO Brian Krzanich insisted the strategy was bearing fruit.

“Our results for the fourth quarter marked a strong finish to the year and were consistent with expectations,” he said in a news release. “Our 2015 results demonstrate that Intel is evolving and our strategy is working. This year, we’ll continue to drive growth by powering the infrastructure for an increasingly smart and connected world.”