This article first appeared on our U.S. website.
Intel (NASDAQ: INTC) just posted its strongest data centre revenue growth in 15 years, but the company also forecast lower revenue, gross margin, and earnings for the fourth quarter. Shares are currently down 28% since the earnings announcement Thursday afternoon.
Demand for Intel’s server chips is now outrunning what it can make, but the forecast shows that the server strength can’t offset a PC slowdown that management expects to last through the first half of next year.
Key numbers
- Revenue: US$16.5 billion, up 21% from a year ago.
- Data centre and AI revenue: US$7.3 billion, up 78%.
- GAAP gross margin: 43%, up from 38.2%.
- Fourth-quarter revenue guidance: US$15 billion to $16 billion, below the third quarter’s result.
What it means
Chipmaking carries heavy fixed costs, so extra volume through Intel’s factories falls quickly to profit. Data centre operating income roughly tripled to about US$3.0 billion, even as PC sales slipped. Management’s top priority is adding Xeon supply, so demand isn’t the limit.
The forecast runs that math in reverse. Intel guides GAAP gross margin down to 37.1% from this quarter’s 43%, and the earnings announcement doesn’t explain why. Lower sales spread across the same fixed costs would explain much of it.
GAAP earnings per share fell to US$0.60 from US$0.90 even as operating income rose sharply. Last year’s quarter included a US$5.45 billion gain from selling most of Intel’s stake in Altera. The diluted share count also jumped after heavy stock sales, including a US$23 billion public offering this quarter, so profit is split across far more shares.
What to watch next
Watch whether fourth-quarter gross margin holds near the 37.1% forecast and whether added Xeon supply keeps data centre sales growing as PC sales slide.