01—Abstract
Summary
Summary of the 10-Q filed July 23, 2021. Cited figures are marked; the original filing is the authoritative source.
Intel Corporation's (INTC) Q2 2021 filing shows a slight year-over-year revenue decline of 0.5%, reaching $19.6 billiona.
This was primarily driven by a 9%b drop in the Data Center Group (DCG) revenue due to lower average selling prices (ASPs) and reduced platform volume, exacerbated by a strong comparison period in Q2 2020. The Non-Volatile Memory Solutions Group (NSG) also saw a significant revenue decrease due to lower ASPs and volume. Despite these headwinds, the Client Computing Group (CCG) delivered a 6% revenue increase, fueled by robust notebook demand and a recovering desktop market.
The Internet of Things Group (IOTG) and Mobileye also reported strong growth. Profitability metrics show a mixed picture. GAAP operating income decreased by 3% to $5.5 billionc, with an operating margin of 28.3%.
Diluted EPS was $1.24d. Significant items impacting the results included a $2.2 billion charge related to the VLSI litigation and asset impairments for non-strategic businesses. The company is making strategic investments, notably a $3.5 billion investment in advanced packaging manufacturing in New Mexico and the launch of new Xeon and Core processors, signaling continued focus on technology development despite the revenue pressures.
02—Key points
Key Highlights
- Total revenue for Q2 2021 was $19.6 billion, a slight decrease of 0.5% year-over-year, impacted by declines in DCG and NSG, partially offset by growth in CCG, IOTG, and Mobileye.
- Client Computing Group (CCG) revenue increased by 6% driven by strong notebook demand and a recovering desktop market, although notebook platform ASPs saw a notable decline of 17%.
- Data Center Group (DCG) revenue declined by 9% due to lower average selling prices (ASPs) and reduced platform volume, facing a strong comparison from Q2 2020.
- Non-Volatile Memory Solutions Group (NSG) revenue decreased by 34% due to lower ASPs and volume, reflecting market softness and pricing pressure, in addition to the ongoing divestiture process.
- The company announced a significant $3.5 billion investment to expand advanced packaging manufacturing capabilities in Rio Rancho, New Mexico.
- Intel launched its 3rd Gen Intel® Xeon® Scalable CPU (Ice Lake) and 11th Gen Intel® Core™ H-series mobile processors (Tiger Lake-H), highlighting continued product innovation.
- A substantial $2.2 billion charge was recorded in the first quarter of 2021 related to VLSI litigation, impacting operating expenses and net income.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Intel Corp kept $0.26.
- Revenue$19.63B100.0%
- Cost of revenue−$8.43B42.9%
- Gross profit$11.21B57.1%
- Operating costs−$5.66B28.8%
- Operating income$5.55B28.3%
- Interest, other & tax−$485.0M2.5%
- Net income$5.06B25.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 23, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $19.63B$19.73B | −0.5% |
| Cost of Revenue | $8.43B$9.22B | −8.6% |
| Gross Profit | $11.21B$10.51B | +6.7% |
| R&D Expenses | $3.71B$3.35B | +10.8% |
| SG&A Expenses | $1.60B$1.45B | +10.5% |
| Operating Expenses | $5.66B$4.81B | +17.7% |
| Operating Income | $5.55B$5.70B | −2.7% |
| Interest Expense | $129.00M$186.00M | −30.6% |
| Net Income | $5.06B$5.11B | −0.9% |
| EPS (Basic) | $1.25$1.20 | +4.2% |
| EPS (Diluted) | $1.24$1.19 | +4.2% |
| Shares Outstanding (Basic) | 4.05B4.25B | −4.6% |
| Shares Outstanding (Diluted) | 4.08B4.28B | −4.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of the revenue changes in Q2 2021?
Revenue was primarily impacted by a 9% decline in the Data Center Group (DCG) due to lower ASPs and volume, and a 34% decrease in the Non-Volatile Memory Solutions Group (NSG) due to market softness and pricing pressure. These were partially offset by a 6% increase in the Client Computing Group (CCG) driven by strong notebook demand and a recovering desktop market, as well as growth in IOTG and Mobileye.
How did profitability fare in the quarter, and what factors influenced it?
GAAP operating income decreased by 3% to $5.5 billion, resulting in an operating margin of 28.3%. Diluted EPS was $1.24. Profitability was affected by a significant $2.2 billion charge related to VLSI litigation and asset impairments for non-strategic businesses. Higher operating expenses and increased R&D investments also played a role.
What are Intel's key strategic investments or developments highlighted in this filing?
Intel announced a $3.5 billion investment to equip its New Mexico facility for advanced packaging manufacturing, including its Foveros 3D packaging technology. The company also launched new product lines, such as the 3rd Gen Intel® Xeon® Scalable CPU and the 11th Gen Intel® Core™ H-series mobile processors, underscoring its commitment to technological advancement.
What is the status of the NAND memory business divestiture?
Intel signed an agreement with SK hynix Inc. to divest its NAND memory business for $9.0 billion. The transaction will occur in two closings, with the first expected not before November 1, 2021. The NAND assets are classified as 'held for sale' on the balance sheet.
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