Intel reported second-quarter earnings that beat analyst estimates, driven by revenues from data center chips, programmable solutions, and the Internet of Things. But the company warned it is cautious about the core PC market.
In the previous quarter, Intel said it would lay off 12,000 employees. That was a clear sign that Intel intended to do something dramatic to deal with its weakness in mobile chips and the steady decline of the personal computer. Intel is a bellwether for the PC market and the whole electronics industry.
The company reported non-GAAP earnings per share of 59 cents a share, compared to estimates of 53 cents by analysts and down 6 percent from a year ago. Revenue was $13.5 billion, slightly below estimates of $13.6 billion for the quarter ended June 30. The Q2 2016 revenue was up 3 percent from a year ago.
Intel expects its restructuring to accelerate its transformation from a PC company to one that “powers the cloud and billions of smart, connected computing devices.”
“Second-quarter revenue matched our outlook and profitability was better than we expected,” said Brian Krzanich, Intel CEO, in a statement. “In addition, our restructuring initiative to accelerate Intel’s transformation is solidly on-track. We’re gaining momentum heading into the second half. While we remain cautious on the PC market, we’re forecasting growth in 2016 built on strength in data center, the Internet of Things and programmable solutions.”
Intel has 106,000 employees, down 6,000 from the previous quarter. That means Intel is expected to continue shrinking as it tries to hit its 12,000 staff reduction target.
Intel is forecasting third-quarter revenue of $14.9 billion, or higher than the average season revenues. Non-GAAP gross profit margins are expected to be 62 percent. For the full year, Intel expects growth of mid-single digits.
Intel said Client Computing Group revenue was $7.3 billion, down 3 percent sequentially and down 3 percent year-over-year.
It said Data Center Group revenue was $4.0 billion, up 1 percent sequentially and up 5 percent year-over-year.
Internet of Things Group revenue was $572 million, down 12 percent sequentially and up 2 percent year-over-year. Non-Volatile Memory Solutions Group revenue was $554 million, down 1 percent sequentially and down 20 percent year-over-year.
And Intel Security Group revenue was $537 million, flat sequentially and up 10 percent year-over-year. The Programmable Solutions Group revenue was $465 million, up 30 percent sequentially.
“Intel slightly beat on the quarter, had solid, above seasonal forecast, but investors seemed spooked on data center revenues,” said Patrick Moorhead, analyst at Moor Insights & Strategy. “Intel is certainly capable of hitting the overall double-digit datacenter objectives due to a lot of factors. The enterprise market is stabilizing, the public cloud is still growing, and I expect Intel to gain share in networking. I wish Intel would have given a bit more granularity into the PC market, but at this point, there is low confidence in consumer on the whole, and the giant, enterprise refresh into Windows 10 will happen in 2017. “