Intel Smashes Earning Targets, Denies 10nm Problems

In theory, 2018 has been a rocky year for Intel. The company has weathered the repeated announcement of security issues related to Spectre and Meltdown. It dismissed its previous CEO, Brian Krzanich. It’s had to announce the delay of its 10nm process and then fend off rumors that said process node was completely canceled as of earlier this week. AMD’s Ryzen 7 has mounted strong competition all year, while AMD’s Epyc server platform has taken market share away from Xeon as well.

And yet, based on Intel’s actual recorded revenue for Q3, you’d be forgiven if you forgot the company had faced so much as a brief headwind these past few months. The company recorded revenue of over $19.2B, a new record, up 19 percent year-on-year. Data center revenue grew 22 percent, while PC revenue grew 16 percent. The company set a new earnings record, at $1.38 per share and raised its full-year outlook to $71.B. Intel set revenue records for all of its reporting groups.

AMD’s results yesterday were stronger than they looked once you factored crypto sales into the equation. Intel sales are great everywhere. While it looks like iPhone modem sales may have plumped out the Client Computing Group slightly, you can see on the slide below that the gains in “Adjacencies” aren’t large enough to account for the improvements to client PC sales revenue overall — there were improvements in ASPs and volume shipments as well. Modem revenue grew 66 percent year-over-year — winning the iPhone is a game-changer for Intel’s modem business.

IoT isn’t a major profit driver for Intel the way DCG and CCG are, but we keep an eye on the segment because it represents some of Intel’s ‘future’ technology bets. Overall growth was brisk, with significant revenue increases in every segment. The only minor downside was a slight decrease in operating income for Intel’s Programmable Solutions Group, which includes its FPGA business.

“Stronger than expected customer demand across our PC and data-centric businesses continued in the third quarter. This drove record revenue and another raise to our full-year outlook, which is now up more than six billion dollars from our January expectations. We are thrilled that in a highly competitive market, customers continue to choose Intel,” said Bob Swan, Intel CFO and Interim CEO. “In the fourth quarter, we remain focused on the challenge of supplying the incredible market demand for Intel products to support our customers’ growth. We expect 2018 will be another record year for Intel, and our transformation positions us to win share in an expanded $300 billion total addressable market.”

10nm Update

Intel reiterated today that its 10nm process is on-track and on-schedule, making the point repeatedly in a number of different ways. According to Intel (in multiple remarks), the company has faith and confidence in its 10nm ramp at this point, it’s on-target and on-schedule. This statement from Venkata S. M. Renduchintala is typical of the company’s comments:

[W]e’re still very much reinforcing and reaffirming our previous guidance that we believe that we’ll have 10-nanometer shipping by holiday of 2019. And if anything, I feel more confident about that at this call than I did on the call a quarter ago. So we’re making good progress and I think we’re making the quarter-on-quarter progress that’s consistent with prior generations having reset the progress curve.

That’s as ironclad a statement as you could ask for. It’s still possible that Intel chose to redefine its 10nm node and that the product it will ship as “10nm” isn’t the 10nm that it debuted back in 2017. Until the company releases more details, we can’t say what the node will look like. But as far as its ability to field a 10nm product, Intel has presented the overwhelming argument that it can, without much wiggle room on the timeline.

There’s no bad here to talk about. Intel had an amazingly good quarter, the company is firing on every single thruster, economically speaking, and there’s no sign of weakness in any of its results.

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