Intel's Q3 solid; Q4 outlook cautious

Intel's Q3 solid; Q4 outlook cautious

Summary: Intel launched a bevy of new processors and filled the channel to prep for the launch of Windows 8.1 devices such as 2-in-1 systems. Analysts have been cautious about the prospects for a fourth quarter PC upgrade cycle.


Intel's third quarter earnings were better than expected with revenue in line with expectations and the fourth quarter outlook fell on the cautious side. Intel's data center group delivered strong results as expected.

The company reported third quarter earnings of $3 billion, or 58 cents a share, on revenue of $13.5 billion, flat from a year ago. Wall Street was looking for third quarter earnings of 53 cents a share on revenue of $13.46 billion.

Intel launched a bevy of new processors and filled the channel to prep for the launch of Windows 8.1 devices such as 2-in-1 systems. Analysts have been cautious about the prospects for a fourth quarter PC upgrade cycle and Intel's ability to deliver a strong fourth quarter.

Turns out Intel was cautious too. The company projected fourth quarter revenue of $13.7 billion, give or take $500 million. Wall Street was looking for sales of $14 billion. Given that outlook, Intel's revenue may appear to be light. The gross margin outlook was in line.

Intel CEO Brian Krzanich said the third quarter was as expected in a tough environment. Among the key units:

  • The company's data center group had third quarter revenue of $2.9 billion, up 12.2 percent from a year ago.
  • Intel's PC client group had third quarter sales of $8.4 billion, down 3.5 percent from a year ago.
  • Other Intel architecture unit---think mobile---had revenue of $1.1 billion, down 9.3 percent.

Here's the breakdown:

intc units Q3

In prepared remarks, Intel CFO Stacey Smith said;

The worldwide PC supply chain saw a small increase in inventory levels in the third quarter as customers continued to build inventory of Haswell based PCs but inventory levels are still being managed well below historical averages.

Key takeaways from Intel's conference call:

  • Krzanich said: "While consumer demand in Emerging Markets was sluggish we started to see early signs of improvement in North America and Western Europe. Our see our performance in this environment as evidence of an increasingly broad and diverse product portfolio."

  • Cloud revenue was up 40 percent from a year ago and storage was up 20 percent. High-performance computing sales were up 27 percent from a year ago.

  • Intel is making progress on LTE enabled processors. "By the end of the year we expect to have a voice over LTE versions available for customers. And our second-generation of voice over LTE product with carrier aggregation will be available in the first half of next year," said Krzanich.

By the numbers:

  • Intel ended the quarter with $19.1 billion in cash and investments.

  • 107,200 employees were on the books at the end of the quarter. 

  • Average selling prices in the third quarter for PC processors were up 1 percent from a year ago, but unit volumes were off 5 percent. 

  • Average selling prices for data center processors were up 3 percent with volume up 4 percent.

Topics: Hardware, Intel, Processors

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  • Have to point out

    that those 2-in-1 systems are going to be the way for the future. At some point we'll have all the processing power necessary for most desktop apps in cell phones.

    When we do get there, your cell will be your system. You need to use it like a laptop, you'll dock it to such. Similar for Tablet uses (just a big cell phone). Obviously with connections to a big screen, KB and mouse the old box machines become a thing of the past.

    One thing is holding it back. Have not seen much in the way of thumb drive or sdhc card capacity improvements beyond 128g. That could hold things back a little.
    • almost agree but

      With 4G you shouldn't really need more than 128GBn but equally important is the way in which data is accessed and presented. Siri was a nice upgrade from dragon, but Cortana looks to. Take this to a whole new level with fully natural language. Interesting times we live in.
  • Intels new low power data center chips have ended any need for arm there

    Now they need to kick their smartphone game into high gear. Their airmont plans are insufficient. They need to move up their timeline, get their graphics also moved up, and figure out how to get the 10nm stuff out asap so they can move 7nm up by a year. Samsung will probably always want to keep using it's own but every other phone oem should be moving to intel. And even Samsung should be moving to intel for their tablets.
    Johnny Vegas