10-QPeriod: Q2 FY2017

INTEL CORP Quarterly Report for Q2 Ended Apr 1, 2017

Filed April 27, 2017For Securities:INTC

Summary

Intel Corporation reported strong financial results for the first quarter of 2017, with net revenue of $14.8 billion, an increase of 8% year-over-year, driven by higher average selling prices (ASPs) in PCs and growth in data center and IoT businesses. Diluted earnings per share (EPS) also saw a significant increase to $0.61, up from $0.42 in the prior year's quarter. This performance was underpinned by a robust gross margin of 61.8%, improved by 14nm process technology costs and favorable shifts in product mix. The company is making strategic moves, including the pending acquisition of Mobileye N.V. for approximately $15.3 billion to bolster its presence in autonomous driving, and the recent completion of the Intel Security Group (ISecG) divestiture. Despite facing challenges like lower PC platform volumes and investments in new technologies like 10nm process, Intel demonstrated operational efficiency with R&D and MG&A spending down 1% year-over-year as a percentage of revenue.

Financial Highlights

55 data points
Beta

Revenue

$14.80B

61.9% Gross Margin

Net Income

$2.96B

20.0% Net Margin

EPS (Diluted)

$0.61

Total Assets

$115.65B

Cash & Equivalents

$4.93B

Free Cash Flow

$1.95B

Financial Statements
Beta
Revenue$14.80B
Cost of Revenue$5.64B
Gross Profit$9.16B
R&D Expenses$3.31B
SG&A Expenses$2.10B
Operating Expenses$5.53B
Operating Income$3.63B
Interest Expense$146.00M
Net Income$2.96B
EPS (Basic)$0.63
EPS (Diluted)$0.61
Shares Outstanding (Basic)4.72B
Shares Outstanding (Diluted)4.88B

Key Highlights

  • 1Net revenue increased by 8% to $14.8 billion in Q1 2017 compared to Q1 2016.
  • 2Diluted EPS rose to $0.61 from $0.42, representing a 45% increase.
  • 3Gross margin improved to 61.8% from 59.3%, driven by higher ASPs and cost efficiencies.
  • 4The Data Center Group (DCG) saw a 6% revenue increase, supported by growth in cloud and communication segments.
  • 5Non-Volatile Memory Solutions Group (NSG) experienced substantial revenue growth of 55% to $866 million.
  • 6Intel announced a definitive agreement to acquire Mobileye for approximately $15.3 billion to expand into autonomous driving solutions.
  • 7The divestiture of the Intel Security Group (ISecG) was completed in April 2017.

Frequently Asked Questions

Intel's revenue growth of 8% to $14.8 billion was primarily driven by higher average selling prices (ASPs) across its personal computer (PC) segment and growth in its Data Center and Internet of Things (IoT) businesses. Higher ASPs, especially in notebook and Data Center Group (DCG) platforms, coupled with strong performance in the Non-Volatile Memory Solutions Group (NSG), contributed significantly to the revenue increase.

The pending acquisition of Mobileye N.V. for approximately $15.3 billion is a key strategic move for Intel to significantly enhance its position in the automotive sector, particularly in advanced driver-assistance systems (ADAS) and autonomous driving. By combining Mobileye's expertise in computer vision and machine learning with Intel's high-performance computing and connectivity capabilities, Intel aims to develop comprehensive 'cloud-to-car' automated driving solutions.

The Client Computing Group (CCG) saw a 6% revenue increase, driven by higher ASPs despite lower unit volumes. The Data Center Group (DCG) also grew revenue by 6%, fueled by the cloud and communications segments, although operating income declined due to increased operating expenses and factory start-up costs. The Internet of Things Group (IOTG) revenue increased by 11%, while the Non-Volatile Memory Solutions Group (NSG) showed exceptional growth of 55%.

Intel completed the divestiture of ISecG on April 3, 2017, forming a jointly-owned company called McAfee. This strategic move allows Intel to focus on its core businesses. The financial results for Q1 2017 still include some ISecG activity before the divestiture, and the company expects to recognize a pre-tax gain in the second quarter related to the transaction.