What To Expect From Intel’s Q1?

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Intel (NASDAQ:INTC) is expected to publish its Q1 2019 results on April 25. This note details Trefis’ forecasts for Intel, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~ How Did Intel Fare In 2018, And What Can We Expect In 2019? for more details on the key drivers of the company’s expected Q1 performance. In addition, you can see more of our data for Information Technology companies here.

How have Intel’s revenues changed over recent quarters, and what’s the forecast for Q1 2019?

  • Total Revenues for Intel have largely trended higher over recent quarters.
  • Revenues grew from $17.1 billion in Q4 2017 to $18.7 billion in Q4 2018.
  • The growth can primarily be attributed to higher sales in its Client Computing Group.
  • We estimate Intel’s revenues to be $16.03 billion for Q1; almost flat when compared to the prior year quarter.

What are Intel’s key sources of revenues?

  • Intel generates its revenues primarily from four segments, Client Computing, Data Center, Internet of Things, and All Others.
  • Client Computing Group includes revenue from processors and platform products designed for use in notebooks, desktops, tablets, phones, and other mobile communication products.
  • Data Center Group includes sales of processors and chipsets designed for the enterprise, cloud, communications infrastructure, and technical computing segments.
  • Internet of Things includes revenue that Intel earns from the sale of platforms designed for embedded applications for medical, automotive, industrial, retail, and other market segments; as well as software-optimized products for the embedded and mobile market segments. It also includes small low-power chips that are used in wearable devices and a range of consumer and industrial products.
  • All Other Revenue includes revenue from software products for endpoint security, network and content security, risk and compliance, and software products and services that promote Intel architecture as the platform of choice for software development. The division also includes results of operations from Intel’s reported segments including Non-Volatile Memory Solutions Group, Programmable Solutions, and All Other.

What to expect from the Client Computing Group?

  • Client Computing Group revenues grew from $9.0 billion in Q4 2017 to $9.8 billion in Q4 2018.
  • This growth was primarily led by strong gaming and commercial demand.
  • We forecast the revenues to be $8.3 billion in Q1 2019, reflecting modest growth over the prior year quarter.
  • The company should continue to see higher gaming demand, and mid-single-digit gains in notebook segment.

How Much Can Data Center Group Grow?

  • Data Center Group revenues have grown from $5.6 billion in Q4 2017 to $6.1 billion in Q4 2018. This can be attributed to higher Xeon Scalable sales. We expect Xeon sales to continue to grow, albeit at a slower pace, given the growth in AMD’s EPYC sales.
  • Intel controlled around 99% of the server markets till 2017. However, it has lost some of its share to AMD’s EPYC processors since then.
  • In the long run, the data center group will likely benefit from the growth in cloud computing, which will result in greater sales of bigger, faster, and higher-end servers at the expense of cheaper ones.
  • However, in the near term, there are a few headwinds, which will likely result in slower growth in 2019.
  • As such, we forecast only a modest growth in Q1 2019.

What will be the impact of the above on Intel’s EPS?

  • We expect the earnings to be $0.89 per share on an adjusted basis in Q1. This reflects 2% growth to the prior year quarter.
  • The growth in earnings will likely be led by lower share count.
  • The company expects a slight decline in its margins in 2019, and this should be visible in Q1 as well.

 

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