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Intel (INTC) Q3 Earnings Beat Estimates, Revenues Up Y/Y
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Intel (INTC - Free Report) reported third-quarter 2021 non-GAAP earnings of $1.71 per share, which beat the Zacks Consensus Estimate by 54.1% and surged 58.3% year over year.
Revenues (excluding NAND memory business) totaled $18.09 billion, up 4.8% year over year. GAAP revenues were $19.19 billion, up 4.7% year over year and comfortably outpaced the consensus mark by 5.4%.
Intel’s top line growth benefited from strong performance by the Internet of Things and Mobileye businesses, as well as recovery in the enterprise business of the data center segment.
However, Intel’s shares were down 10% in pre-market trading as the results and long-term view failed to impress investors.
Intel Corporation Price, Consensus and EPS Surprise
Client Computing Group or CCG (50.4% of total revenues) revenues were down 1.9% year over year to $9.66 billion. Lower notebook volumes due to component shortage hurt top-line growth.
Platform revenues increased 2.2% year over year to $8.95 billion. Adjacent revenues plunged 34.6% from the year-ago quarter to $710 million.
PC volumes fell 6% on a year-over-year basis. Notebook platform volumes declined 14% year over year and 26% sequentially. Desktop platform volumes increased 16% year over year and 11% sequentially.
Notebook’s average selling price (“ASP”) increased 10% year over year. Desktop ASP increased 4% on a year-over-year basis.
Intel’s partnership with Microsoft (MSFT - Free Report) has been a key catalyst in aiding its prospects. Microsoft is using four new Intel Core processors in its Surface device, including the first Surface device to be Intel Evo platform verified. It also brings Thunderbolt connectivity to the Surface lineup.
During the reported quarter, Intel introduced the new Intel Arc brand for its upcoming high-performance graphics products, covering hardware and software, and services.
Data Center Group (“DCG”) (32.9%) revenues increased 10% year over year to $6.50 billion.
Platform revenues were up11.6% year over year to $5.75 billion. Adjacent revenues fell 0.7% from the year-ago quarter’s levels to $749 million.
DCG platform unit volumes were up 8% year over year and 6% sequentially. ASP increased 3% year over year but decreased 5% sequentially.
The company announced Amazon (AMZN - Free Report) as its first customer to use Intel Foundry Services packaging services, and a partnership with Qualcomm (QCOM - Free Report) to use the future Intel 20A process technology.
Cloud service providers or CSP revenues declined 20% year over year. Intel announced the availability of the third-generation Xeon Scalable processor (Ice Lake) for Amazon Web Services customers through the new Amazon Elastic Compute Cloud (Amazon EC2) M6i instances.
For Google Cloud customers, Intel introduced third-generation Xeon Scalable processor (Ice Lake) through the new Compute Engine N2.
Revenues from Enterprise & Government jumped 70% on a year-over-year basis. Revenues from Communication service provider increased18% year over year.
Internet of Things Group revenues (7.1% of total revenues) surged 50.2% year over year to $1.37 billion.
IOTG revenues increased 53.9% from the year-ago quarter to $1.04 billion.
Mobileye revenues soared 39.3% on a year-over-year basis to $326 million, driven by improvement in global vehicle production. Intel announced strategic global partnerships with ZEEKR and Sixt SE, and additional plans to unveil Mobileye’s robotaxi equipped with the Mobileye Drive system during the reported quarter.
Non-Volatile Memory Solutions Group (“NSG”) (5.8%) revenues declined 4.2% year over year to $1.11 billion on lower ASPs.
Programmable Solutions Group (“PSG”) (2.5%) revenues increased 16.3% from the year-ago quarter’s level to $478 million, due to enterprise and cloud inventory digestion.
Intel has a residual segment, All Other (0.9%), which includes results of operations from other adjustments. The segment reported revenues of $81 million, down 23.6% year over year.
Notably, DCG, Internet of Things Group, NSG, PSG and All Other business units form the crux of Intel’s data-centric business model. Revenues from the data-centric businesses were $9.53 billion (49.6% of total revenues), up 12.3% year over year.
Operating Details
Non-GAAP gross margin was 57.8%, up 130 basis points (bps) on a year-over-year basis, driven by improved mix and strong top-line growth.
Non-GAAP Research & development (R&D) expenses, and Marketing, General & Administrative (MG&A) expenses as percentage of revenues increased 280 bps year over year to 27.4%.
Non-GAAP operating margin contracted 170 bps on a year-over-year basis to 28.8%.
CCG operating margin contracted 180 bps year over year to $34.3%, driven by higher revenues, lower inventory reserves and reduced 10-nanometer costs.
DCG operating margin was 31.7%, down 60 bps on a year-over-year basis.
Internet of Things Group operating income amounted to $276 million compared with $61 million reported in the year-ago quarter. Mobileye’s operating income was $105 million compared with $47 million reported in the year-ago quarter.
NSG group’s operating income was $442 million compared with $29 million in the year-ago quarter. PSG operating margin expanded 620 bps year over year to 15.9%.
The All Other segment reported a loss of $1.05 billion compared with a loss of $575 million in the year-ago quarter.
Balance Sheet
As of Sep 25, 2021, cash and cash equivalents, short-term investments, and fixed-income trading asset balance were $34.6 billion compared with $24.9 billion as of Jun 26, 2021.
Total debt, as of Sep 25, 2021, was $40.3 billion compared with $35.4 billion as of Jun 26, 2021.
In the third quarter, the company paid out dividends worth $1.4 billion.
Intel generated $9.9 billion in cash from operations, up from $8.8 billion in the second quarter. Free cash flow was $5.9 billion.
Guidance
For fourth-quarter 2021, Intel expects non-GAAP revenues of roughly $18.3 billion, indicating 3% decline from the year-ago reported figure.
The Zacks Consensus Estimate is pegged at $18.22 billion, suggesting a decline of 8.8% from the year-ago quarter.
Non-GAAP gross margin is anticipated to be around 53.5% for the fourth quarter, down 650 bps year-over-year.
Non-GAAP earnings are expected to be 90 cents per share, indicating 39% decline from the year-ago quarter. The consensus mark for earnings stands at $1.02 per share, suggesting a decline of 33% from the prior-year reported figure.
For 2021, this Zacks Rank #4 (Sell) stock still expects revenues to be around $73.5 billion. The figure is expected to increase 1% year over year.
Non-GAAP earnings are expected to be $5.28 per share compared with $4.80 per share forecast earlier in July 2021. The figure is expected to decline 6% year over year.
Non-GAAP gross margin is now anticipated to be 57.2%, better than the previously guided figure of 56.5% for the 2021.
Capital spending for the year is expected to be $18.5 billion. Non-GAAP free cash flow is now projected to be $12.5 billion for 2021.
For 2022, Intel expects revenues to be greater than $74 billion. The top line is expected to witness a CAGR of 10-12% over the next four to five years.
Gross margin is expected to be 51%-53% over the next two to three years before moving upward.
Capital spending for 2022 is expected between $25 billion and $28 billion.
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Intel (INTC) Q3 Earnings Beat Estimates, Revenues Up Y/Y
Intel (INTC - Free Report) reported third-quarter 2021 non-GAAP earnings of $1.71 per share, which beat the Zacks Consensus Estimate by 54.1% and surged 58.3% year over year.
Revenues (excluding NAND memory business) totaled $18.09 billion, up 4.8% year over year. GAAP revenues were $19.19 billion, up 4.7% year over year and comfortably outpaced the consensus mark by 5.4%.
Intel’s top line growth benefited from strong performance by the Internet of Things and Mobileye businesses, as well as recovery in the enterprise business of the data center segment.
However, Intel’s shares were down 10% in pre-market trading as the results and long-term view failed to impress investors.
Intel Corporation Price, Consensus and EPS Surprise
Intel Corporation price-consensus-eps-surprise-chart | Intel Corporation Quote
Segment Revenue Details
Client Computing Group or CCG (50.4% of total revenues) revenues were down 1.9% year over year to $9.66 billion. Lower notebook volumes due to component shortage hurt top-line growth.
Platform revenues increased 2.2% year over year to $8.95 billion. Adjacent revenues plunged 34.6% from the year-ago quarter to $710 million.
PC volumes fell 6% on a year-over-year basis. Notebook platform volumes declined 14% year over year and 26% sequentially. Desktop platform volumes increased 16% year over year and 11% sequentially.
Notebook’s average selling price (“ASP”) increased 10% year over year. Desktop ASP increased 4% on a year-over-year basis.
Intel’s partnership with Microsoft (MSFT - Free Report) has been a key catalyst in aiding its prospects. Microsoft is using four new Intel Core processors in its Surface device, including the first Surface device to be Intel Evo platform verified. It also brings Thunderbolt connectivity to the Surface lineup.
During the reported quarter, Intel introduced the new Intel Arc brand for its upcoming high-performance graphics products, covering hardware and software, and services.
Data Center Group (“DCG”) (32.9%) revenues increased 10% year over year to $6.50 billion.
Platform revenues were up11.6% year over year to $5.75 billion. Adjacent revenues fell 0.7% from the year-ago quarter’s levels to $749 million.
DCG platform unit volumes were up 8% year over year and 6% sequentially. ASP increased 3% year over year but decreased 5% sequentially.
The company announced Amazon (AMZN - Free Report) as its first customer to use Intel Foundry Services packaging services, and a partnership with Qualcomm (QCOM - Free Report) to use the future Intel 20A process technology.
Cloud service providers or CSP revenues declined 20% year over year. Intel announced the availability of the third-generation Xeon Scalable processor (Ice Lake) for Amazon Web Services customers through the new Amazon Elastic Compute Cloud (Amazon EC2) M6i instances.
For Google Cloud customers, Intel introduced third-generation Xeon Scalable processor (Ice Lake) through the new Compute Engine N2.
Revenues from Enterprise & Government jumped 70% on a year-over-year basis. Revenues from Communication service provider increased18% year over year.
Internet of Things Group revenues (7.1% of total revenues) surged 50.2% year over year to $1.37 billion.
IOTG revenues increased 53.9% from the year-ago quarter to $1.04 billion.
Mobileye revenues soared 39.3% on a year-over-year basis to $326 million, driven by improvement in global vehicle production. Intel announced strategic global partnerships with ZEEKR and Sixt SE, and additional plans to unveil Mobileye’s robotaxi equipped with the Mobileye Drive system during the reported quarter.
Non-Volatile Memory Solutions Group (“NSG”) (5.8%) revenues declined 4.2% year over year to $1.11 billion on lower ASPs.
Programmable Solutions Group (“PSG”) (2.5%) revenues increased 16.3% from the year-ago quarter’s level to $478 million, due to enterprise and cloud inventory digestion.
Intel has a residual segment, All Other (0.9%), which includes results of operations from other adjustments. The segment reported revenues of $81 million, down 23.6% year over year.
Notably, DCG, Internet of Things Group, NSG, PSG and All Other business units form the crux of Intel’s data-centric business model. Revenues from the data-centric businesses were $9.53 billion (49.6% of total revenues), up 12.3% year over year.
Operating Details
Non-GAAP gross margin was 57.8%, up 130 basis points (bps) on a year-over-year basis, driven by improved mix and strong top-line growth.
Non-GAAP Research & development (R&D) expenses, and Marketing, General & Administrative (MG&A) expenses as percentage of revenues increased 280 bps year over year to 27.4%.
Non-GAAP operating margin contracted 170 bps on a year-over-year basis to 28.8%.
CCG operating margin contracted 180 bps year over year to $34.3%, driven by higher revenues, lower inventory reserves and reduced 10-nanometer costs.
DCG operating margin was 31.7%, down 60 bps on a year-over-year basis.
Internet of Things Group operating income amounted to $276 million compared with $61 million reported in the year-ago quarter. Mobileye’s operating income was $105 million compared with $47 million reported in the year-ago quarter.
NSG group’s operating income was $442 million compared with $29 million in the year-ago quarter. PSG operating margin expanded 620 bps year over year to 15.9%.
The All Other segment reported a loss of $1.05 billion compared with a loss of $575 million in the year-ago quarter.
Balance Sheet
As of Sep 25, 2021, cash and cash equivalents, short-term investments, and fixed-income trading asset balance were $34.6 billion compared with $24.9 billion as of Jun 26, 2021.
Total debt, as of Sep 25, 2021, was $40.3 billion compared with $35.4 billion as of Jun 26, 2021.
In the third quarter, the company paid out dividends worth $1.4 billion.
Intel generated $9.9 billion in cash from operations, up from $8.8 billion in the second quarter. Free cash flow was $5.9 billion.
Guidance
For fourth-quarter 2021, Intel expects non-GAAP revenues of roughly $18.3 billion, indicating 3% decline from the year-ago reported figure.
The Zacks Consensus Estimate is pegged at $18.22 billion, suggesting a decline of 8.8% from the year-ago quarter.
Non-GAAP gross margin is anticipated to be around 53.5% for the fourth quarter, down 650 bps year-over-year.
Non-GAAP earnings are expected to be 90 cents per share, indicating 39% decline from the year-ago quarter. The consensus mark for earnings stands at $1.02 per share, suggesting a decline of 33% from the prior-year reported figure.
For 2021, this Zacks Rank #4 (Sell) stock still expects revenues to be around $73.5 billion. The figure is expected to increase 1% year over year.
Non-GAAP earnings are expected to be $5.28 per share compared with $4.80 per share forecast earlier in July 2021. The figure is expected to decline 6% year over year.
Non-GAAP gross margin is now anticipated to be 57.2%, better than the previously guided figure of 56.5% for the 2021.
Capital spending for the year is expected to be $18.5 billion. Non-GAAP free cash flow is now projected to be $12.5 billion for 2021.
For 2022, Intel expects revenues to be greater than $74 billion. The top line is expected to witness a CAGR of 10-12% over the next four to five years.
Gross margin is expected to be 51%-53% over the next two to three years before moving upward.
Capital spending for 2022 is expected between $25 billion and $28 billion.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.