Intel's most important business is slowing down, stock drops

Intel just reported its second quarter earnings after the bell on Wednesday afternoon.

It’s a beat on earnings and a match on revenues. But it reported another slow down in its data center group, which has been the company’s biggest growth driver, and the stock is down 3% in after hours.

Here are the most important numbers:

  • EPS (non-GAAP): $0.59 per share vs. $0.53 per share estimated
  • Revenue: $13.53 billion vs. $13.54 billion estimated (up 3% year-over-year)

Its data center group, which has been driving Intel’s growth, decelerated again this quarter, growing 5% year-over-year for $4 billion in revenue. That’s three straight quarters of a slow down for its data center group, as it grew 9% in the first quarter and 11% in the fourth quarter of 2015, respectively.

Intel’s client computing group, comprised of its PC and mobile units, and historically its largest revenue-driver, had $7.3 billion in sales, down 3% from last year.

Intel gave revenue guidance of $14.9 billion next quarter, slightly higher than the $14.6 billion street estimates.

Intel went through a number of big changes in the second quarter.

It rolled out one of its biggest layoff plans in history, which will cut 12,000 jobs, or 11% of the total workforce, by mid-2017. Intel said the restructuring is “solidly on-track,” leading the company’s move to the post-PC era that focuses more on data center and connected device chips.

It also canceled its upcoming Atom chips for smartphones and tablets, essentially taking a big step away from the mobile chip business, a segment that cost the company billions of dollars in losses over the past few years.

Not everyone’s happy about the changes taking place at the company. According to about a dozen current and former employees we spoke to, Intel’s targeting old timers in its latest round of layoffs in order to bring in younger, fresher talent to the company.

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