Intel Gains as Data Center Revival Fuels Revenue Growth

23 Jan by Vitaliy Dadalyan

Intel Gains as Data Center Revival Fuels Revenue Growth

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Intel Gains as Data Center Revival Fuels Revenue Growth(Bloomberg) — Intel Corp. gave bullish quarterly and full-year revenue forecasts, driven by a surge in demand for chips that power large cloud-computing centers. The shares jumped as much as 7.8% in late trading.Sales in the current quarter and in 2020 will be well above what analysts had predicted and are outpacing normal industry trends, the chipmaker said on Thursday. Fourth-quarter revenue and profit also topped Wall Street’s highest estimates. As the biggest provider of server chips, Intel is benefiting from a rush to build capacity in data centers operated by companies such as Alphabet Inc.’s Google, Facebook Inc. and Amazon.com Inc’s AWS.“We’re well ahead of our expectations in the quarter and it’s continuing into this year,” Chief Financial Officer George Davis said in an interview. “That’s just a great dynamic.”Revenue from cloud-service providers, who offer computing power and storage via the internet, surged 48% in the fourth quarter, fueling a gain in sales of the company’s most lucrative chips. A spike in demand from these buyers is helping to ease concerns that Intel was losing its technology leadership in computer processors and faced a competitive threat from customers’ own development efforts. Some high-end server chips cost more than compact car.Revenue in the current period will be about $19 billion, and profit will be $1.23 a share, excluding certain items, Intel said. That compares with average analysts’ projections for $17.2 billion and $1.04 a share. Sales in 2020 will be about $73.5 billion, the company said late Thursday in a statement. Analysts were looking for $72.2 billion on average, according to data compiled by Bloomberg.The company’s annual forecast implies growth will abate in the second half of the year, Davis said. Big purchases from data-center owners tend to come in lumps, followed by slower periods when the components are being built into computers.“The hard part is forecasting when they’re going to slow down and digest,” he said.Fourth-quarter sales rose 8% to $20.2 billion, the Santa Clara, California-based company said. Analysts on average had predicted $19.2 billion. Net income was $6.9 billion, or $1.58 a share, compared with estimates for $1.23 a share. Gross margin, or the percentage of sales remaining after deducting the cost of production, was 58.8% in the quarter.The largest U.S. chipmaker has fallen behind rivals in semiconductor-manufacturing technology, sparking concern on Wall Street about sales growth and future profit. In November, the company told PC customers inventory remained tight because of limited manufacturing capacity. Still, executives have said that Intel is targeting a broader range of markets and the company has plenty of room to expand in new areas, such as networking and the auto industry.Demand for personal computers held up well in the recent period, Davis said. Global PC shipments rose 2.3% from a year earlier in the December period as companies upgraded to a new version of Microsoft Corp.’s Windows operating system, according to research firm Gartner Inc. Intel has more than 80% market share in PC processors, and it controls even more of the server-chip market. In that business, semiconductor rival Advanced Micro Devices Inc. has fielded new products, and companies such as Amazon have said they’re designing some chips on their own — leading some analysts to predict Intel would begin to lose business and struggle to grow this year.So far, there’s no sign of that hurting the company’s performance. In the fourth quarter, Intel’s data center unit reported a sales increase of 19% to $7.2 billion. PC-chip sales gained 2% to $10 billion. The company’s programmable-chip unit was the only division to post a decline. Sales at the Mobileye unit, which makes chips used to help vehicles pilot themselves, grew 31% to $240 million.(Updates with comment from CFO in third paragraph.)To contact the reporter on this story: Ian King in San Francisco at ianki[email protected] contact the editors responsible for this story: Jillian Ward at [email protected], Alistair Barr, Andrew PollackFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.