10-QPeriod: Q3 FY2018

INTEL CORP Quarterly Report for Q3 Ended Sep 29, 2018

Filed October 26, 2018For Securities:INTC

Summary

Intel Corporation reported a record third quarter for 2018, showcasing robust financial performance across all its business segments. Driven by strong customer demand for its high-performance products, the company achieved record revenues in its Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), and Mobileye. This strong operational performance, coupled with operating margin leverage and a lower effective tax rate, led to a significant increase in net income. From a capital allocation standpoint, Intel generated substantial cash flow from operations during the first nine months of the year and returned a considerable amount to shareholders through dividends and share repurchases. The company's strategic shift towards a data-centric business model is showing positive results, with data-centric segments collectively growing by 22%. Intel is also investing in key growth areas such as artificial intelligence and autonomous driving, indicating a forward-looking approach to market opportunities.

Financial Highlights

56 data points
Beta

Revenue

$19.16B

64.5% Gross Margin

Net Income

$6.40B

33.4% Net Margin

EPS (Diluted)

$1.38

Total Assets

$128.24B

Cash & Equivalents

$3.41B

Free Cash Flow

$4.98B

Financial Statements
Beta
Revenue$19.16B
Cost of Revenue$6.80B
Gross Profit$12.36B
R&D Expenses$3.43B
SG&A Expenses$1.60B
Operating Expenses$5.01B
Operating Income$7.35B
Interest Expense$109.00M
Net Income$6.40B
EPS (Basic)$1.40
EPS (Diluted)$1.38
Shares Outstanding (Basic)4.57B
Shares Outstanding (Diluted)4.65B

Key Highlights

  • 1Record Q3 2018 revenue of $19.2 billion, a 19% increase year-over-year.
  • 2Net income surged to $6.4 billion in Q3 2018, up from $4.5 billion in Q3 2017, driven by strong sales and a lower tax rate.
  • 3All major business segments (CCG, DCG, IOTG, NSG, Mobileye) reported record revenues in the third quarter.
  • 4Data-centric businesses grew 22% year-over-year, highlighting the success of Intel's strategic transformation.
  • 5Generated $22.5 billion in cash flow from operations in the first nine months of 2018 and returned $12.6 billion to shareholders.
  • 6Introduced new 9th Gen Intel® Core™ processors to target the growing gaming market.
  • 7Addressing factory production constraints by investing in capital expenditures and working with customers to align demand and supply.

Frequently Asked Questions

The record revenue in Q3 2018 was driven by strong customer demand across all business segments, particularly for Intel's high-performance products. Both the data-centric businesses (collectively up 22%) and the PC-centric business (up 16%) contributed significantly to the overall revenue growth.

The U.S. Tax Cuts and Jobs Act favorably impacted Intel's effective tax rate. The U.S. statutory federal tax rate reduction from 35.0% to 21.0% resulted in a significant decrease in the effective tax rate, contributing to higher net income. For the first nine months of 2018, the Tax Reform reduced the effective tax rate by approximately nine percentage points.

Intel is investing additional capital expenditure to increase its manufacturing capacity. The company is also working closely with customers to align demand with available supply and making progress in improving yields for its 10nm process technology. Prioritization of production for server and high-performance PC segments is also a key strategy.

Intel's strategy to transform into a data-centric company is showing strong results. The data-centric businesses collectively grew 22% in the third quarter, driven by segments like cloud and communication service providers. The company is also actively investing in emerging opportunities such as artificial intelligence and autonomous driving.