Intel (INTC - Free Report) is scheduled to report fourth-quarter 2018 results on Jan 24.
Data Center Group or DCG, Client Computing Group or CCG, and MobilEye form the crux of Intel’s data-centric business model, which comprised almost 50% of the company’s top line in the third quarter. Mobileye revenues of $191 million were up approximately 50% on a year-over-year basis in the last reported quarter, primarily driven by strength in its ADAS and autonomous driving platforms-based solutions.
The company’s Non-Volatile Memory Solutions or NSG segment is also anticipated to be a key catalyst.
Click here to know how the company’s overall fourth-quarter performance is expected to be.
Intel’s PC-centric business is represented by this segment. The company bundles PCs, notebooks, 2-in-1s, tablets and other computing devices under the Client segment, which aids comparison with the PC market numbers provided by IDC and Gartner.
CCG accounted for 53.4% of third-quarter revenues. The segment revenues increased 15.5% on a year-over-year basis and 17.3% sequentially to $10.23 billion. Strength in notebook (up 13%), desktop (up 9%) and modem was reflected in year-over-year growth.
Management noted strength in the commercial and gaming business. On a year-over-year basis, PC volumes were up a record 6%. Notebook ASP was up 4%, while Desktop ASP increased 10%.
Additionally, the company announced that it will introduce 9th generation desktop solutions in January this year. Intel showcased latest hybrid CPU architecture client platform, dubbed as “Lakefield” by the company. Notably, Lakefield utilizes Foveros 3D packaging technology and is touted “to be in production this year”.
The company also introduced the Intel Core i9-9900K gaming processor. Intel’s dominance in CPU market is anticipated to improve with the new processors for sleek laptops. The new CPUs are likely to pave the way for ultra-thin PCs.
Moreover, strong product mix and higher ASPs on the back of customer preference are anticipated to bolster CCG operating margin in the fourth quarter.
The Zacks Consensus Estimate for CCG is pegged at $9.841 billion, representing growth of almost 9.9% from the year-ago quarter.
3D XPoint Memory & Xeon Scalable Driving DCG
We expect robust performance from the data centric part to drive results. Management stated that data-centric businesses were up 22% collectively, primarily due to strength in cloud and communication service provider domains.
DCG accounted for 32% of third-quarter revenues. Revenues surged 25.9% year over year and soared 10.6% sequentially to $6.14 billion. Platform volumes increased 15%, while platform ASP was up 10% on a year-over-year basis. Growth was broad-based with strong demand for high-performance products (including Xeon Scalable) driving ASPs.
Per Intel, the cloud service provider revenues advanced 50%. Cloud business grew 50% on the back of diversified customer base. Enterprise & Government inched up 1%. Commercial service provider revenues surged 30%. Cloud and Commercial service provider were greater than 66% of DCG's revenues.
Intel’s strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory is likely to be a tailwind.
The company’s first Optane DC Persistent Memory has been selected by the likes of Alphabet’s (GOOGL - Free Report) Google, Microsoft (MSFT - Free Report) and Alibaba (BABA - Free Report) , which is another positive.
Further, Intel Xeon Scalable noted 95 new performance records globally as robust adoption continues. Taboola and Rolls-Royce remain notable customer wins for Xeon.
The Zacks Consensus Estimate for DCG is pegged at $6.368 billion, representing growth of almost 14.1% from the year-ago quarter.
NSG Poised on SSD Demand from Data Centers
Revenues surged 21.3% year over year and inched 0.2% sequentially to $1.08 billion driven by strong demand for data center SSD solutions and Optane drives.
Intel offers Optane SSDs for clients and 3D NAND technologies, which helps in driving innovation in solid-state drives (SSDs) and other memory products. This in turn is anticipated to bolster Intel’s NSG segment revenues in the to-be-reported quarter.
Management noted that 50% of company’s data center and client SSDs have shifted to 64-layer 3D NAND, which is improving cost per gigabyte. This is in turn bolstering the segment’s margin expansion.
The Zacks Consensus Estimate for NSG unit is estimated to be $1.157 billion, representing growth of almost 30.1% from the year-ago quarter.
Programmable Solutions Group or PSG: Deserves a Special Mention
The Altera and eSAIC business is now the Programmable Solutions Group. It increased 5.8% from the year-ago quarter but declined 4.1% sequentially to $496 million.
Strength in data center and embedded products drove top-line growth. PSG's data center segment surged 45% from the year-ago quarter. Management stated that revenues from advanced FPGA products (28, 20 and 14-nm) grew 55% from the year-ago quarter.
Intel strengthened its PSG product portfolio with eASIC buyout, by introducing the new Programmable Acceleration Card (“PAC”) with Intel Stratix 10 SX FPGA. These product rollouts are expected to impact PSG’s segment in the to-be reported quarter.
The Zacks Consensus Estimate for PSG is projected at $522 million, less than $568 million in the year-earlier quarter.
Intel carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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