Intel Gives Bullish Sales, Profit Forecast on Data Center Demand

An analyst says the data center chip market has started to recover from a recent multi-quarter pause.

Bloomberg

October 24, 2019

1 Min Read
Intel Executive VP and General Manager Data Center Group Navin Shenoy speaks during an Intel press event for CES 2019 in Las Vegas.
Intel Executive VP and General Manager Data Center Group Navin Shenoy speaks during an Intel press event for CES 2019 in Las Vegas.David Becker/Getty Images

Ian King (Bloomberg) -- Intel Corp. gave an upbeat forecast for fourth-quarter sales and profit, indicating demand for semiconductors that power cloud-computing data centers is improving even as the trade dispute between the U.S. and China drags on.

Revenue in the current period will be about $19.2 billion, and net income will be about $1.28 a share, Intel said Thursday in a statement. That compares with average analysts’ estimates of $18.9 billion and $1.16 a share. Shares climbed about 8% in late trading on the bullish outlook.

While Intel’s peers are reporting increasing difficulties amid the China-U.S. trade standoff, the company is benefiting from booming demand for the lucrative server chips that run giant data centers. Revenue is also being buoyed by a steadier memory-chip market and continued strong growth in the automotive unit.

“The Data Center market appears to be showing some signs of life,” BMO Capital Markets analyst Ambrish Srivastava wrote in a note, “as it starts to recover some from the pause in buying we saw over the last several quarters.”

Intel shares jumped as high as $56.59 in extended trading following the report. The stock had earlier closed at $52.23 in New York trading. Shares have gained 11% this year.

Sales in the third quarter were little changed at $19.2 billion, the Santa Clara, California-based company said. Analysts on average had predicted $18 billion, according to data compiled by Bloomberg. Net income was $6 billion, or $1.35 a share, compared with estimates for $1.17 a share. Gross margin, or the percentage of sales remaining after deducting the cost of production, was 58.9% in the quarter. That measure of profitability, a gauge of efficiency for a manufacturing company, has sunk below 60% on an annual basis only once this decade.

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