Intel up slightly on big earnings beat

  • Intel beat expectations on third-quarter results and fourth-quarter guidance.
  • Intel said earlier this week that it's making progress on technology for 10-nanometer chips.
  • The company's CEO, Brian Krzanich, resigned in June.

Intel stock rose as much as 6 percent but later pared back much of its gains Thursday after the company reported better-than-expected third-quarter earnings and full-year guidance.

Here are the key numbers:

  • Earnings: $1.40 per share, excluding certain items, vs. $1.15 per share expected by analysts, according to Refinitiv.
  • Revenue: $19.16 billion, vs. $18.11 billion as expected by analysts, according to Reuters.

Intel's revenue was up 19 percent year over year, according to a statement. That's stronger than the 2 percent growth in the third quarter of 2017.

Looking ahead, Intel forecast earnings of $1.22 per share, excluding certain items, on $19 billion in revenue in the fourth quarter. Analysts were expecting fourth-quarter earnings of $1.09 per share, excluding certain items, on $18.39 billion in revenue, according to Refinitiv.

Intel raised its guidance for the full year to earnings of $4.53 per share, excluding certain items, on $71.2 billion in revenue. Analysts were expecting $4.16 per share, excluding certain items, on $69.54 billion in revenue, according to Refinitiv.

Intel's biggest business segment, the Client Computing Group, reached $10.23 billion in revenue in the second quarter, easily surpassing the FactSet analyst consensus of $9.33 billion.

The second-largest Intel segment, the Data Center Group, generated $6.14 billion in revenue, above the $5.89 billion estimate.

And Intel's Non-Volatile Memory Solutions Group came in under the $1.14 billion revenue estimate, producing $1.08 billion in revenue.

Intel shares have dropped 3.2 percent this year, while most large tech companies have notched gains and the Nasdaq has risen 6.6 percent. Brian Krzanich resigned as CEO in June, and Intel has been searching for his replacement.

Meanwhile, the company has been delayed in deploying technology for future generations of chips, though it's moving forward on 10-nanometer chips, which are expected to be more power efficient than past processors.

The status of the 10-nanometer process would likely be of central importance to analysts on the call, along with the CEO search, the opportunity for growth in the data center market and gross margin potential in 2019, analysts Stacy Rasgon and James Williams at Bernstein Research wrote in a note to clients on Monday.

"We have repositioned some 10-nanometer to 14-nanometer, and we are making progress with our 10-nanometer process technology," Intel chief financial officer Bob Swan said on a conference call with analysts after the earnings release. Intel shares sold off some following the remarks.

With respect to the 7-nanometer process, Swan said Intel has obviously been investing there and that the rate of investment it makes to "prove out" the technology would factor into capital expenditures next year, along with growth in 14-nanometer process and the rate that it scales the 10-nanometer process.

In the fourth quarter, Intel's biggest challenge is meeting any demand for PC and internet of things products that's beyond what's been built into the guidance, Swan said.

"We do expect fourth quarter upside from here will be limited," he said.

Along with scaling back investments in wearables and selling off its Wind River group, Intel has also exited the Saffron business, Swan told analysts on the call. The company bought Saffron in what it billed as a push into cognitive computing in 2015, and added it to the New Devices Group. Intel closed up that group earlier this year.

At the same time, Swan said that it faces the challenge of "growing competition." One current competitor is AMD, which has getting its chips into data centers run by cloud infrastructure providers like Oracle.

In the third quarter, which ended Sept. 30, Intel announced new eighth-generation PC chips, acquired NetSpeed Systems and disclosed details about chip security vulnerabilities.

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