01—Abstract
Summary
Summary of the 10-Q filed July 26, 2019. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation's second-quarter 2019 results show a slight year-over-year revenue decline to $16.5 billiona, primarily driven by a 7% decrease in its data-centric businesses.
This was partially offset by a 1% growth in the PC-centric business, which benefited from strong average selling prices (ASPs) and a favorable commercial segment mix. Despite the revenue dip, Intel generated substantial operating cash flow of $12.5 billionb in the first six months and returned $8.4 billion to stockholders through dividends and share buybacks.
The company is navigating market pressures such as cloud customers absorbing capacity and weakening demand in certain segments, while also investing in innovation, including the shipment of its 10nm-based 10th Gen Intel Core processors. The planned divestiture of the smartphone modem business signals a strategic shift towards focusing on broader 5G opportunities.
02—Key points
Key Highlights
- Total revenue for Q2 2019 was $16.5 billion, a decrease of 3% year-over-year.
- Data-centric businesses revenue declined 7% due to factors like cloud capacity absorption and NAND pricing pressure.
- PC-centric business revenue grew 1% driven by higher ASPs and a stronger commercial segment mix.
- Operating income decreased to $4.6 billion from $5.3 billion in the prior year's quarter.
- Diluted EPS was $0.92, down from $1.05 in Q2 2018.
- Generated $12.5 billion in cash flow from operations in the first six months of 2019.
- Returned $8.4 billion to stockholders in the first six months through dividends ($2.8 billion) and buybacks ($5.6 billion).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2019, Intel Corp kept $0.25.
- Revenue$16.50B100.0%
- Cost of revenue−$6.63B40.2%
- Gross profit$9.88B59.8%
- Operating costs−$5.26B31.9%
- Operating income$4.62B28.0%
- Interest, other & tax−$438.0M2.7%
- Net income$4.18B25.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed July 26, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $16.50B$16.96B | −2.7% |
| Cost of Revenue | $6.63B$6.54B | +1.3% |
| Gross Profit | $9.88B$10.42B | −5.2% |
| R&D Expenses | $3.44B$3.37B | +2.0% |
| SG&A Expenses | $1.64B$1.73B | −5.0% |
| Operating Expenses | $5.26B$5.15B | +2.2% |
| Operating Income | $4.62B$5.27B | −12.4% |
| Interest Expense | $135.00M$116.00M | +16.4% |
| Net Income | $4.18B$5.01B | −16.5% |
| EPS (Basic) | $0.94$1.08 | −13.0% |
| EPS (Diluted) | $0.92$1.05 | −12.4% |
| Shares Outstanding (Basic) | 4.47B4.65B | −3.9% |
| Shares Outstanding (Diluted) | 4.52B4.75B | −4.7% |
05—Questions
Frequently Asked Questions
What is the primary reason for the year-over-year revenue decline?
The primary reason for the year-over-year revenue decline is the decrease in the data-centric businesses, which were down 7%. This was caused by factors such as cloud customers absorbing capacity, a contraction in the enterprise and government data center market, weakening demand in China, and continued pressure on NAND pricing.
How is the PC-centric business performing?
The PC-centric business showed resilience, growing revenue by 1% year-over-year. This growth was primarily driven by an increase in average selling prices (ASPs) due to a richer commercial segment mix and growth in modem sales. However, PC client volume declined slightly due to supply constraints.
What is the company's strategy regarding its smartphone modem business?
Intel has signed an agreement to divest the majority of its smartphone modem business, expected to close in Q4 2019. This strategic move allows Intel to refocus its 5G efforts on modernizing network and edge infrastructure, rather than consumer mobile devices.
How is Intel managing its cash flow and returning capital to shareholders?
Intel generated a strong $12.5 billion in cash flow from operations in the first six months of 2019. During the same period, the company returned $8.4 billion to stockholders, comprising $2.8 billion in dividends and $5.6 billion in share repurchases, indicating a commitment to shareholder returns.
06—Continue