Intel sees jump in cloud and PC sales for first quarter, but higher costs in Q2 and economic unknowns for the rest of the year
Intel has reported a surge in sales of home PC and cloud equipment for the first quarter, but its shares traded lower on a lowered forecast for the second quarter and uncertainty around the company’s full-year outlook amidst the coronavirus pandemic.
Intel’s Data Centre Group (DCG) showed revenues up 43 percent year-on-year for the quarter to $7 billion (£5.7bn), including a 53 percent year-on-year growth in revenues from cloud service providers as shelter-in-place orders fuelled cloud usage.
The company said demand for data centre chips had increased as customers built up their capacity to support staff working remotely, said chief financial officer George Davis.
Chief executive Bob Swan said cloud and network infrastructures had delivered massive scaling during the coronavirus crisus, with cloud-delivered services such as online shopping and video collaboration becoming “indispensable”.
Intel’s PC business, the Client Computing Group (CCG), saw revenues of $9.8bn, growing 14 percent year-on-year, due in part to demand fuelled by the need to work or attend classes from home.
Notebook volumes rose more than 20 percent in the quarter, Davis said, saying in an earnings call that the period was “heavily weighted toward notebooks”.
Overall, Intel’s non-GAAP earnings per share came in at $1.45 on total revenues of $19.8bn, up 23 percent year-on-year, compared to analysts’ expectations of $1.28 on revenues of $18.7bn.
The company said it had maintained essential factory operations and had seen greater than 90 percent on-time delivery in spite of Covid-19 restrictions.
But Intel’s second-quarter forecasted earnings were below expectations due in part to the costs of developing the upcoming “Tiger Lake” 10-nanometre PC chip, which Intel plans to begin selling in the third quarter.
Intel also said it could not make a full-year forecast due to coronavirus-related economic uncertainty, spurring a sell-off that saw its shares plummet by 6 percent in extended trading on Thursday, although its stock traded higher on Friday.
“It’s really hard to think about the second half in terms of how demand is going to look compared to what we ultimately thought when we first gave guidance,” Davis told investors during the earnings call.
He said Intel expects lower gross margins in the second quarter due to “Tiger Lake” costs, which he said drove the company’s profit expectations below analysts’ forecasts.
Davis said Intel should be able to absorb the “Tiger Lake” costs in the second quarter and recoup them in the third quarter and beyond.
But that depends on demand levels that remain unknown as the world continues to struggle with ongoing coronavirus lockdowns.