Data Center Rally Has Fueled Revenue Growth For Intel

Intel Corp. seems to be experiencing revenue growth. The Corporation gave a bullish quarterly and full-year revenue forecasts which were driven by a surge in demand for chips that power large cloud-computing centers. On Thursday, the firm said sales in the current quarter and in 2020 will be well above the analyst's prediction and will outpace normal industry trends. Intel's fourth-quarter revenue and profit topped Wall Street’s highest estimates.

Intel is the biggest provider of server chips and currently, it is benefiting from a rush to build capacity in data centers operated by companies such as Alphabet Inc.’s Google, Facebook Inc. and Amazon.com Inc’s AWS. Chief Financial Officer of Intel, George Davis in an interview said, “We’re well ahead of our expectations in the quarter and it’s continuing into this year. That’s just a great dynamic.”

According to Yahoo Finance: revenue from cloud-service providers, which offer computing power and storage via the internet, surged 48% in the fourth quarter, fueling gain in sales of the company’s most lucrative chips. A spike in demand from these buyers is helping to ease concerns that Intel was losing its technology leadership in computer processors and faced a competitive threat from customers’ own development efforts.

In a statement on Thursday, Intel said, "revenue in the current period will be about $19 billion, and profit will be $1.23 a share, excluding certain items." The company said sales in 2020 will be about $73.5 billion.  With reference to data compiled by Bloomberg, that compares with average analysts’ projections for $17.2 billion and $1.04 a share and $72.2 billion on average.

Intel said fourth-quarter sales rose 8% to $20.2 billion. Analysts however predicted an average of $19.2 billion. Net income was $1.58 a share, compared with analysts' estimates for $1.23 a share. Gross margin, or the percentage of sales remaining after deducting the cost of production, was 58.8% in the quarter.

The CEO, Bob Swan during a conference call said that the company plans to increase spending on new plants and equipment to $17 billion in 2020 in order to boost its production to a point where it’s not only able to fill all customer orders but build inventory. He said, after failing to meet all demand in the fourth quarter, avoiding a repeat of that mistake is one of his biggest priorities. Swan further said the company’s struggles with its move to advanced 10-nanometer production are beginning to ease and Intel plans to have server chips built with that technique available in the second half.

George Davis disclosed that the demand for personal computers held up well in the recent period. Research firm, Gartner Inc. said Global PC shipments rose 2.3% from a year earlier in the December period as companies upgraded to a new version of Microsoft Corp.’s Windows operating system.

It is reported that Intel expects the market this year for PCs to be flat from 2019 as that replacement cycle comes to an end. More than 80% of market share in PC processors belongs to Intel, and it controls even more of the server-chip market.

The company is likely to experience stiff competition sooner than later as its rival, Advanced Micro Devices Inc. has fielded new products.  Amazon recently disclosed that they’re designing some chips on their own. This situation has led some analysts to predict Intel would begin to lose business and struggle to grow this year. Intel executives said that part of the reason they’re predicting less growth for the second half is the expectation that competition will intensify.