10-QPeriod: Q2 FY2019

INTEL CORP Quarterly Report for Q2 Ended Jun 29, 2019

Filed July 26, 2019For Securities:INTC

Summary

Intel Corporation's second-quarter 2019 results show a slight year-over-year revenue decline to $16.5 billion, 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 billion 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.

Financial Highlights

52 data points
Beta

Revenue

$16.50B

59.8% Gross Margin

Net Income

$4.18B

25.3% Net Margin

EPS (Diluted)

$0.92

Total Assets

$130.76B

Cash & Equivalents

$2.87B

Free Cash Flow

$4.03B

Financial Statements
Beta
Revenue$16.50B
Cost of Revenue$6.63B
Gross Profit$9.88B
R&D Expenses$3.44B
SG&A Expenses$1.64B
Operating Expenses$5.26B
Operating Income$4.62B
Interest Expense$135.00M
Net Income$4.18B
EPS (Basic)$0.94
EPS (Diluted)$0.92
Shares Outstanding (Basic)4.47B
Shares Outstanding (Diluted)4.52B

Key Highlights

  • 1Total revenue for Q2 2019 was $16.5 billion, a decrease of 3% year-over-year.
  • 2Data-centric businesses revenue declined 7% due to factors like cloud capacity absorption and NAND pricing pressure.
  • 3PC-centric business revenue grew 1% driven by higher ASPs and a stronger commercial segment mix.
  • 4Operating income decreased to $4.6 billion from $5.3 billion in the prior year's quarter.
  • 5Diluted EPS was $0.92, down from $1.05 in Q2 2018.
  • 6Generated $12.5 billion in cash flow from operations in the first six months of 2019.
  • 7Returned $8.4 billion to stockholders in the first six months through dividends ($2.8 billion) and buybacks ($5.6 billion).

Frequently Asked Questions

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.

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.

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.

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.