10-QPeriod: Q1 FY2014

INTEL CORP Quarterly Report for Q1 Ended Mar 29, 2014

Filed April 25, 2014For Securities:INTC

Summary

Intel Corporation's (INTC) first-quarter 2014 results showed a slight year-over-year increase in net revenue, reaching $12.76 billion, up 1% from $12.58 billion in the prior year's first quarter. This growth was primarily driven by a stabilization in the PC Client Group (PCCG) and continued strength in the Data Center Group (DCG). However, net income saw a decrease to $1.93 billion from $2.05 billion year-over-year, and diluted earnings per share slightly declined to $0.38 from $0.40. The company experienced a notable increase in operating expenses, particularly in Research and Development (R&D), which rose 13% year-over-year, reflecting investments in new process technologies like 14nm. Restructuring and asset impairment charges also contributed to higher expenses, totaling $137 million in the quarter, primarily related to workforce reductions and facility exits. Despite these increased costs, Intel maintained a strong gross margin percentage of 59.6%, an improvement from 56.2% in the prior year, due to lower unit costs and reduced excess capacity charges.

Financial Highlights

52 data points
Beta

Revenue

$12.76B

59.6% Gross Margin

Net Income

$1.93B

15.1% Net Margin

EPS (Diluted)

$0.38

Total Assets

$91.93B

Cash & Equivalents

$4.78B

Free Cash Flow

$812.00M

Financial Statements
Beta
Revenue$12.76B
Cost of Revenue$5.15B
Gross Profit$7.61B
R&D Expenses$2.85B
SG&A Expenses$2.05B
Operating Expenses$5.10B
Operating Income$2.51B
Interest Expense$37.00M
Net Income$1.93B
EPS (Basic)$0.39
EPS (Diluted)$0.38
Shares Outstanding (Basic)4.97B
Shares Outstanding (Diluted)5.12B

Key Highlights

  • 1Net revenue increased slightly to $12.76 billion (+1% YoY), driven by PC market stabilization and Data Center Group growth.
  • 2Net income decreased to $1.93 billion YoY, impacting diluted EPS which fell to $0.38 from $0.40.
  • 3R&D expenses significantly increased by 13% YoY to $2.85 billion, signaling investment in future technologies like 14nm process.
  • 4Restructuring and asset impairment charges of $137 million were recognized, primarily due to workforce reductions.
  • 5Gross margin percentage improved to 59.6% from 56.2% YoY, reflecting cost efficiencies and reduced excess capacity.
  • 6The Mobile and Communications Group (MCG) experienced a significant revenue decline of 61% YoY, impacting profitability in that segment.
  • 7Intel returned $1.1 billion in dividends and $545 million in stock repurchases to shareholders during the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by continued stabilization in the PC Client Group (PCCG) and strong performance in the Data Center Group (DCG), which benefited from growth in cloud computing and networking.

The decrease in net income and EPS was largely due to a significant increase in operating expenses, particularly R&D investments for new process technologies and restructuring charges, which outweighed the modest revenue growth and gross margin improvements.

The 13% year-over-year increase in R&D spending reflects Intel's commitment to investing in future technologies, including the development of its 14nm process technology and new product families like the 5th generation Intel Core processors and Intel Quark SoCs for the Internet of Things market.

The $137 million in restructuring and asset impairment charges indicates proactive measures by Intel to align resources with market needs, including workforce reductions and the exit of certain businesses and facilities. While these charges negatively impacted current quarter earnings, they are intended to drive future cost savings.