Intel Rallies After Earnings Surprise

Intel reported Q2 EPS of $US0.55 on revenue of $US13.8 billion.

Analysts were expecting earnings per share of $US0.52 on revenue of $US13.71 billion.

Following the numbers, shares of Intel were up 2.7% in after hours trade.

For the third quarter, the company expects revenue of $US14.4 billion, plus or minus $US500 million. The company also expects to incur $US20 million worth of restructuring charges during Q3.

For fiscal 2014, the company expects revenue growth of about 5%, slightly higher than what the company had previously expected.

In comments accompanying the release, Intel CFO Stacy Smith said, “The second quarter came in above the expectations we provided in the April Earnings call, and consistent with the revised outlook we released on June 12. It was a good quarter representing financial growth and solid momentum as we approach the second half of the year.”

Looking at its segments for the second quarter, Intel said revenue in its PC Client Group was up 6% over last year, while Data Center Group revenue was up 19% and Internet of Things revenue were up 24% year over year, and up 12% over last quarter.

In the second quarter, the company’s R&D spending was $US4.9 billion, flat from the first quarter.

In the first quarter, Intel reported earnings per share of $US0.38 on revenue of $US12.8 billion.

Here’s the full release from Intel.

SANTA CLARA, Calif., July 15, 2014 — Intel Corporation today reported second-quarter revenue of $US13.8 billion, operating income of $US3.8 billion, net income of $US2.8 billion and EPS of $US0.55. The company generated approximately $US5.5 billion in cash from operations, paid dividends of $US1.1 billion, and used $US2.1 billion to repurchase 74 million shares of stock.

“Our second-quarter results showed the strength of our strategy to extend the reach of Intel technology from the data center to PCs to the Internet of Things,” said Intel CEO Brian Krzanich. “With the ramp of our Baytrail SoC family, we have expanded into new segments such as Chrome-based systems, and we are on track to meet our 40 million unit tablet goal. In addition, we hit an important qualification milestone for our upcoming 14nm Broadwell product, and expect the first systems to be on shelves during the holidays.”

Intel announced that it intends to return more cash to shareholders by lowering its cash balance further through increased share repurchases. The board of directors authorised an increase of $US20 billion to its share repurchase program and the company is forecasting share repurchases of approximately $US4 billion in the third quarter, with additional share repurchases in the fourth quarter. Over the last decade Intel has returned almost $US90 billion to shareholders through dividends and share repurchases.

“This change in our capital structure is the continuation of a multi-year focus on creating value and returning cash to our shareholders, and reinforces our confidence in the business,” said Stacy J. Smith, Intel CFO and executive vice president.

Q2 Key Business Unit Trends

  • PC Client Group revenue of $US8.7 billion, up 9 per cent sequentially and up 6 per cent year-over-year.
  • Data Center Group revenue of $US3.5 billion, up 14 per cent sequentially and up 19 per cent year-over-year.
  • Internet of Things Group revenue of $US539 million, up 12 per cent sequentially and up 24 per cent year-over-year.
  • Mobile and Communications Group revenue of $US51 million, down 67 per cent sequentially and down 83 per cent year-over-year.
  • Software and services operating segments revenue of $US548 million, down 1 per cent sequentially and up 3 per cent year-over-year.

Business Outlook

Intel’s Business Outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments and other significant transactions that may be completed after July 15.

Q3 2014

  • Revenue: $US14.4 billion, plus or minus $US500 million.
  • Gross margin percentage: 66 per cent, plus or minus a couple of percentage points.
  • R&D plus MG&A spending: approximately $US4.9 billion.
  • Restructuring charges: approximately $US20 million.
  • Amortization of acquisition-related intangibles: approximately $US65 million.
  • Impact of equity investments and interest and other: approximately zero.
  • Depreciation: approximately $US1.9 billion.
  • Tax rate: approximately 28 per cent.

Full-Year 2014

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