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Intel earnings: What economic crisis?

Intel earnings: What economic crisis?
  • Q1 revenue: $19.8 billion (23% YoY, -2% QoQ, vs. $18.7 billion expected)
  • Q1 earnings: $5.7 billion (42% YoY, -17% QoQ, above expectations)
  • Q2 revenue guidance: $18.5 billion (below expectations)

The big number: Intel's Data Center Group produces 95% of the processors used in servers around the world, and that business is growing at a 43% clip. It recorded $7 billion in revenue during the quarter.

People are talking: "Over the last several years, we've transformed the company, and are now positioned to grow our share in the largest market opportunity in our history," CEO Bob Swan said on a conference call with analysts. "We live in a world where everything increasingly looks like a computer, including our homes, our cars, our cities, our hospitals and our factories."

Opportunities: Intel doesn't see any slowdown ahead for its primary data-center customers, the large cloud providers like AWS, Microsoft and Alibaba, especially given demand for cloud services as stay-at-home orders continue. The PC market is more uncertain: Swan said that PC orders were actually a little better than expected in the first quarter, as everyone started working from home, but that was offset by slower demand and supply chain disruption in China.

Threats: While China's electronics factories are getting back to work making PCs and servers, Intel employees are still trying to design next-generation products while sequestered, and that's difficult, Swan said. Intel has also been scrambling to catch up to its usual pace of manufacturing improvements after a delay last year, but Swan said that Intel expects to ship new server chips built with its next-generation manufacturing technology by the end of the year.

The power struggle: When times get tough, it's nice to have 95% market share in a market as valuable as server processors. Longtime rival AMD currently offers some of the most competitive offerings it's had in years, and server processors based on Arm's technology are turning heads, but while that enormous market-share lead might slip a bit, Intel isn't currently that worried. And analysts don't appear too worried about PC competition, either: No one on the call asked about reports earlier in the day that Apple plans to use its own chips, instead of Intel's, in laptops starting next year.

However, it definitely feels like a year when consumers and business PC buyers will decide to wring a little more life out of that old notebook. Intel always has its best quarter in the fourth quarter, thanks to the holiday shopping season: If unemployment reaches the heights some economists fear it might, that will have an impact.

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