01—Abstract
Summary
Summary of the 10-Q filed July 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation reported strong financial results for the second quarter of 2018, demonstrating continued transformation from a PC-centric to a data-centric company.
Record quarterly revenue of $16.96 billiona was driven by significant growth in its data-centric businesses (up 26% year-over-year), which now represent nearly 50% of total revenue. Key growth segments include the Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), and Programmable Solutions Group (PSG), all experiencing double-digit revenue increases. The company also saw a 6% revenue increase in its Client Computing Group (CCG), which is funding these strategic data-centric investments.
This overall growth, coupled with strong operating margin leverage and a lower tax rate resulting from the U.S. Tax Cuts and Jobs Act, led to substantial improvements in both GAAP and non-GAAP diluted Earnings Per Share (EPS), which grew 82%b and 44% respectively year-over-year. Intel generated significant cash flow from operations and returned substantial capital to shareholders through dividends and share repurchases.
Notable operational highlights include advancements in product development, such as the Intel XMM 7560 modem and QLC NAND PCIe SSDs, and strategic partnerships like the one with Baidu for autonomous vehicles. Despite ongoing investments in R&D and process technology (like the 10nm), the company remains focused on innovation and expanding its market presence in high-growth data-centric areas.
02—Key points
Key Highlights
- Record second quarter revenue of $16.96 billion, a 15% increase year-over-year.
- Data-centric businesses collectively grew 26% year-over-year, approaching 50% of total revenue.
- Client Computing Group (CCG) revenue grew 6% year-over-year, demonstrating resilience and continued demand.
- GAAP Diluted EPS increased by 82% to $1.05, and non-GAAP Diluted EPS increased by 44% to $1.04.
- Generated $13.7 billion in cash flow from operations in the first half of 2018 and returned $8.6 billion to shareholders.
- Announced progress on 3D XPoint technology joint development with Micron and expanded product offerings with new modems and SSDs.
- Implemented new accounting standards for revenue recognition and financial instruments, impacting reporting.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2018, Intel Corp kept $0.30.
- Revenue$16.96B100.0%
- Cost of revenue−$6.54B38.6%
- Gross profit$10.42B61.4%
- Operating costs−$5.15B30.3%
- Operating income$5.27B31.1%
- Interest, other & tax−$267.0M1.6%
- Net income$5.01B29.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed July 27, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Revenue | $16.96B$14.80B | +14.6% |
| Cost of Revenue | $6.54B$5.64B | +16.1% |
| Gross Profit | $10.42B$9.16B | +13.7% |
| R&D Expenses | $3.37B$3.31B | +1.8% |
| SG&A Expenses | $1.73B$2.10B | −17.8% |
| Operating Expenses | $5.15B$5.53B | −6.9% |
| Operating Income | $5.27B$3.63B | +45.2% |
| Interest Expense | $116.00M$146.00M | −20.5% |
| Net Income | $5.01B$2.96B | +68.9% |
| EPS (Basic) | $1.08$0.63 | +71.4% |
| EPS (Diluted) | $1.05$0.61 | +72.1% |
| Shares Outstanding (Basic) | 4.65B4.72B | −1.6% |
| Shares Outstanding (Diluted) | 4.75B4.88B | −2.7% |
05—Questions
Frequently Asked Questions
What was Intel's revenue performance in Q2 2018, and what drove the growth?
Intel reported record revenue of $16.96 billion for the second quarter of 2018, a 15% increase compared to $14.76 billion in Q2 2017. The growth was primarily driven by its data-centric businesses, which saw a 26% year-over-year increase and now constitute nearly 50% of the company's total revenue. The Client Computing Group (CCG) also contributed with a 6% revenue increase.
How did Intel's profitability change in Q2 2018?
Profitability saw a significant improvement. GAAP diluted Earnings Per Share (EPS) grew by 82% to $1.05 compared to $0.58 in Q2 2017. Non-GAAP diluted EPS also increased substantially, up 44% to $1.04 from $0.72 in Q2 2017. This growth was attributed to top-line revenue increases, strong operating margin leverage, and the benefit of a lower tax rate resulting from the U.S. Tax Cuts and Jobs Act.
What are the key strategic shifts or investments highlighted in this report?
Intel emphasized its ongoing transformation from a PC-centric to a data-centric company. Investments are focused on growing its data-centric businesses (DCG, IOTG, NSG, PSG), which collectively showed robust growth. The company also highlighted R&D investments, including advancements in 10nm process technology and new product developments such as the XMM 7560 modem and QLC NAND PCIe SSDs. Strategic partnerships, like the one with Baidu for autonomous vehicles, were also noted.
What is the status of Intel's joint development with Micron on 3D XPoint technology?
Intel and Micron have agreed to complete joint development for the second generation of 3D XPoint technology, expected in the first half of 2019. However, technology development beyond the second generation will be pursued independently by each company to optimize for their respective business needs. The IMFT facility in Lehi, Utah, will continue to manufacture memory based on 3D XPoint technology.
06—Continue