Intel shares tank 10% on weak data center revenues in 3Q

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Intel saw a big decline in enterprise and government data center sales in the third quarter, after strong performance in the prior two quarters. Businesses have stalled such investments, one analyst said. (Intel)

 

Intel forecast record revenues for all of 2020 in its third quarter financial report on Thursday, but investors weren’t impressed.

Shares dived 10% on weakness in Intel’s data centric businesses.  Intel’s mainstay Data Center Group derived $5.91 billion in revenue, down 7% over a year ago.

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In that group, Intel saw a big 47% decline in revenues from enterprises and government after two quarters of growth above 30%.  Another segment of DCG is cloud, which grew 15% year-over-year on continued demand to support work and learn at home. 

The data centric decline was probably due to the impact COVID-19 has had on companies and governments, analysts said. “Companies stalled inside investments, but there is more concern that AMD and even Nvidia may be taking a larger share of data center sales at Intel’s expense and that this might continue,” said Jack Gold, an analyst at J. Gold Associates.

Intel has recently released new data center silicon, but revenues won’t be realized substantially for up to two quarters, Gold added.

The Internet of Things Group earned $677 million, down 33% from a year ago.  The only group among Intel’s data centric businesses to see an improvement was Mobileye, which had $234 million in revenues, a 2% improvement, on increased global auto production.   

Intel’s PC-centric business gained 1% year-over-year, hitting $9.8 billion in revenues on continued notebook sales to support home-based work and learning.  The company launched the 11th Gen Intel Core processors in the quarter with Iris Xe graphics and 150 designs from PC makers are in development.

Overall, third quarter revenue was $18.33 billion, down 4% from a year ago, while net income was $4.3 billion, down 29%.

CEO Bob Swan said on a conference call that despite the worst year he has faced with a global pandemic and trade disruptions, Intel has raised its revenue and earnings expectations from its July guidance and now expects 5% revenue growth for all of 2020, reaching a record level of $75.3 billion.

“Despite all the inherent challenges, we’ll deliver a stronger year and have a better product portfolio going into next year,” Swan said.

For the fourth quarter, however, Intel forecast $17.4 billion in revenue, down 14% from a year ago, with data centric products down 25% and PC-centric down in the low single digits.

Another positive for Intel: the company’s third 10nm chip manufacturing facility in Arizona is operational and the company expects to ship 30% more 10nm produce volumes in 2020 than it expected in January.  Demand for 10nm has been higher than previously expected.

Intel shares traded at $48.91 in after hours trading, nearly 10% below their closing value on Thursday.

RELATED: STMicroelectronics also sees revenue jump in auto silicon, personal electronics

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