01—Abstract
Summary
Summary of the 10-Q filed October 26, 2018. Cited figures are marked; the original filing is the authoritative source.
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%a. Intel is also investing in key growth areas such as artificial intelligence and autonomous driving, indicating a forward-looking approach to market opportunities.
02—Key points
Key Highlights
- Record Q3 2018 revenue of $19.2 billion, a 19% increase year-over-year.
- Net 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.
- All major business segments (CCG, DCG, IOTG, NSG, Mobileye) reported record revenues in the third quarter.
- Data-centric businesses grew 22% year-over-year, highlighting the success of Intel's strategic transformation.
- Generated $22.5 billion in cash flow from operations in the first nine months of 2018 and returned $12.6 billion to shareholders.
- Introduced new 9th Gen Intel® Core™ processors to target the growing gaming market.
- Addressing factory production constraints by investing in capital expenditures and working with customers to align demand and supply.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, Intel Corp kept $0.33.
- Revenue$19.16B100.0%
- Cost of revenue−$6.80B35.5%
- Gross profit$12.36B64.5%
- Operating costs−$5.01B26.1%
- Operating income$7.35B38.3%
- Interest, other & tax−$951.0M5.0%
- Net income$6.40B33.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed October 26, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $19.16B$14.76B | +29.8% |
| Cost of Revenue | $6.80B$6.08B | +11.8% |
| Gross Profit | $12.36B$10.06B | +22.8% |
| R&D Expenses | $3.43B$3.21B | +6.8% |
| SG&A Expenses | $1.60B$1.66B | −3.4% |
| Operating Expenses | $5.01B$4.92B | +1.8% |
| Operating Income | $7.35B$5.14B | +42.9% |
| Interest Expense | $109.00M$191.00M | −42.9% |
| Net Income | $6.40B$4.52B | +41.7% |
| EPS (Basic) | $1.40$0.96 | +45.8% |
| EPS (Diluted) | $1.38$0.94 | +46.8% |
| Shares Outstanding (Basic) | 4.57B4.69B | −2.4% |
| Shares Outstanding (Diluted) | 4.65B4.82B | −3.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of Intel's record revenue in Q3 2018?
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.
How did the Tax Cuts and Jobs Act impact Intel's financial results?
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.
What is Intel doing to address the reported pressure on its factory network?
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.
What is the status of Intel's strategic shift to a data-centric company?
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.
06—Continue