What Are The Key Takeaways From Intel’s Q3 Earnings?

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Intel’s stock saw a big boost as the company reported its third quarter earnings recently. To understand the key takeaways from Intel’s earnings, please our interactive breakdown of the results and our model for the company. Our price estimate for Intel stands at $41, implying a 10% discount to the market.

Earnings snapshot: Strong Quarter Led Stock To 17-Year High

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Inte’s stock jumped nearly 10%, adding $18-$19 billion in market value. The quarter saw a 35% jump in earnings per share and nearly 15% growth in operating income, though revenue grew by just 2.4%.

First Takeaway: Intel Alleviated Some Concerns Around Its Data Center Business

Intel’s data center business was under pressure because of AMD’s launch of EPYC processors and Nvidia’s foray into AI applications. This concern was addressed somewhat in Q3 2017, as Intel’s data center business grew 7.4%, driven primarily by 4% volume growth and a 2% pricing increase. Cloud accounted for around 60% of sales, which bodes well as this is the primary growth market.

Second Takeaway: Deal With Waymo, Acquisition of Mobileye Position Intel Well

Intel’s foray into applications beyond PCs is paying off, as Internet of Things group revenue jumped 23% in the quarter. Intel has bagged key autonomous vehicle design wins with Waymo, BMY and Fiat-Chrysler to challenge Nvidia. The Mobileye acquisition should also boost Intel’s competence in this fast-growing market.

Third takeaway: Weakness in Client Computing Group, Increased Competition Lead To Conservative Outlook

Our price estimate for Intel is around 10% below the market, due to our relatively conservative outlook for the company. For instance, the company’s Client Computing group revenue fell slightly due to weakness in the PC market and increased competition from AMD’s Ryzen desktop CPUs. Meanwhile, Desktop revenue was down 6%, and AMD’s upcoming launch of Ryzen for notebooks could spell further trouble. Lastly, we are somewhat skeptical about Intel’s competitive positioning in the AI market, where Nvidia is progressing fast

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