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Intel (INTC) to Post Q1 Earnings: DCG, CCG & PSG in Spotlight

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Intel (INTC - Free Report) is scheduled to report first-quarter 2020 results on Apr 23.

The chipmaker’s first-quarter performance is expected to have benefited from solid momentum of its latest high-performance Xeon processors, and growing adoption of IoT applications.

Strength in its data center business, on account of growing adoption of cloud-based solutions amid the coronavirus crisis-induced work-from-home wave, is also expected to have contributed to the to-be-reported quarter’s performance.

Nonetheless, softness in the PC shipments in first quarter due to coronavirus crisis-led supply constraints is likely to have weighed on first-quarter performance.

Click here to know how the company’s overall first-quarter performance is expected to be.

Data-Centric Business Deserves a Special Mention

Intel’s data-centric business model primarily comprises the Data Center Group (“DCG”), Internet of Things Group (“IOTG”), Non-Volatile Memory Solutions (“NSG”), Programmable Solutions Group (“PSG”) and other business units.

Intel’s first-quarter performance is expected to have benefited from strength in its data center business, on account of growing adoption of cloud-based solutions amid the coronavirus crisis-induced work-from-home wave.

Rise in demand from Cloud service providers (CSP) and strength in high-performance second-gen Xeon Scalable processors are likely to have driven DCG performance in the quarter under review.

Notably, the Zacks Consensus Estimate for DCG revenues currently stands at $6.468 billion, indicating growth of 31.9% from the year-ago quarter.

However, stiff competition from AMD (AMD - Free Report) and Xilinx (XLNX - Free Report) is likely to have put pricing pressure and limited margin expansion. In a bid to maintain its competitive position and improve ASPs, Intel is increasing investments on infrastructure, product development and platform. These factors are likely to have affected profitability in the first quarter.

Intel Corporation Revenue (Quarterly)

Meanwhile, PSG segment is anticipated to report growth in the first quarter. The Zacks Consensus Estimate for PSG revenues currently stands at $500 million, indicating growth of 2.9% from the prior-year reported figure. Strength in 5G wireless domain is likely to have positively impacted the segment.

Further, Mobileye’s new ADAS wins and increasing proliferation of IoT are anticipated to have contributed to Intel’s IoT businesses.

Meanwhile, weakness in memory vertical owing to uncertainty in NAND pricing trends is anticipated to get reflected in NSG segment performance. However, the company’s non-volatile memory business is likely to have benefited from momentum in Optane modules.

Markedly, the Zacks Consensus Estimate for NSG revenues currently stands at $1.169 billion, indicating an improvement of 27.8% from the prior-year quarter.

Client Computing Segment in Focus

Intel’s PC-centric business is represented by this segment. Notably, Intel bundles PCs, notebooks, 2-in-1s, tablets and other computing devices under the Client Computing Group or CCG segment.

Incremental adoption of the latest processors and deal wins from Microsoft (MSFT - Free Report) , Google, among others, are anticipated to get reflected in the first-quarter results.

Moreover, new design wins for its first 10-nanometer (nm) mobile CPU, Ice Lake, is likely to have been a tailwind.

Markedly, the Zacks Consensus Estimate for CCG is currently pegged at $9.416 billion, indicating an improvement of 9.7% from the year-ago reported figure. Further, the consensus estimates for CCG-Platform revenues stands at $8.275 billion, suggesting growth of 5.8% from the year-ago reported figure.

However, deteriorating trend in PC shipments in first quarter, is likely to have affected Client Computing Group (or CCG) segment revenues. Per Gartner’s preliminary data, PC shipments in first-quarter 2020 declined 12.3% year over year to 51.6 million units.

Zacks Rank

Currently, Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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