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Appeared on: Thursday, April 26, 2018
Intel Reports Record First-quarter Revenue on Demand for Data Center Chips, 10nm Chips Coming in 2019

Intel reported record first-quarter revenue on strength of its data-centric businesses, which accounted for 49 percent of first-quarter revenue.

The company also expects its full-year revenue of $67.5 billion, up $2.5 billion from its prior guidance.

"Coming off a record 2017, 2018 is off to a strong start. Our PC business continued to execute well and our data-centric businesses grew 25 percent, accounting for nearly half of first-quarter revenue," said Brian Krzanich, Intel CEO. "The strength of Intel's business underscores my confidence in our strategy and the unrelenting demand for compute performance fueled by the growth of data."

"Compared to the first-quarter expectations we set in January, revenue was higher, operating margins were stronger and EPS was better," said Bob Swan, Intel CFO. "Our data-centric strategy is accelerating Intel's transformation, and we're raising our earnings and cash flow expectations for the year."

Intel has been focused on transforming itself from a supplier of personal computers to a maker of chips for growing data center business and newer areas such as driverless cars and artificial intelligence.

In the first quarter, Intel saw strong performance from data-centric businesses, which accounted for approximately half (49%) of Intel's revenue, an all-time high. The Data Center Group (DCG) achieved growth in all market segments and saw increasing adoption of Intel Xeon Scalable processors, including for artificial intelligence
workloads. Non-Volatile Memory Solutions Group (NSG) revenue grew 20 percent as strong demand for storage continued. The Programmable Solutions Group (PSG) won new designs with server OEMs adding Intel's field programmable gate array (FPGA) acceleration to their data center offerings, and strong demand from retail and video customers drove first-quarter growth in the Internet of Things Group (IOTG).

The Client Computing Group (CCG) continued its strong execution and introduced a new lineup of high-performance mobile products including the 8th Gen Intel Core i9 processor and a new Intel Core platform extension that brings together the benefits of 8th Gen Intel Core processors with Intel Optane memory.

Revenue at Intel's client computing, which supplies chips to PC makers and is the biggest contributor to sales, rose 3 percent to $8.2 billion.

Revenue from the data center business recorded its biggest gain of 24 percent to $5.2 billion.

The company's net income rose to $4.45 billion, or 93 cents per share, in the quarter ended March 31, from $2.96 billion, or 61 cents per share, a year earlier. Net revenue rose to $16.07 billion from $14.80 billion.

In autonomous driving, Mobileye continued momentum with automotive customers and recently won a high-volume design for EyeQ. The company also began operating autonomous vehicle test cars in Israel with plans to expand the fleet to other geographies.

Intel has delayed the transition to a more advanced chip manufacturing process. The company said it will continue to make 14 nm process and architectural optimizations in both data center and client products that will be coming this year.

Intel is currently shipping low-volume 10 nm product and now expects 10 nm volume production to shift to 2019.

In a conference call with analysts following its first quarter earnings announcement, Intel CEO Brian Krzanich said Intel is shipping 10nm products in low volumes and that yields are improving, but that the rate of improvement is slower than the company expected.

"As a result, volume production is moving from the second half of 2018 into 2019," Krzanich said. "We understand the yield issues and have defined improvements for them, but they will take time to implement and qualify."

Krzanich said the yield issues are tied to defects resulting from the amount of multi-patterning required for 10nm, the last node before Intel will begin using extreme ultraviolet (EUV) lithography at 7nm.



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