uploads///Data center

Intel’s DCG Continued to Record Positive Growth in Fiscal 2Q15


Jul. 27 2015, Updated 9:05 a.m. ET

DCG’s performance in fiscal 2Q15

Intel’s (INTC) DCG (Data Center Group) segment continued its upward growth trajectory in fiscal 2Q15. For the last few quartersdue to the SMAC (social, mobile, analytics, and cloud) revolution, this segment has consistently reported positive growth. Along with IoT (Internet of Things), DCG has been identified as a key driver of Intel’s growth.

In its 2Q15 earnings release, Intel stated that the DCG segment generated $3.9 billion in revenue. On a sequential and YoY (year-over-year) basis, it grew 5% and 10%, respectively. Also, its contribution to the operating income exceeded the contribution of any other individual segment. We’ll discuss this in more detail later in the series. A probable reason for this could be that the DCG segment is cheaper to operate than the CCG (Client Computing Group) segment. Also, For the last few quartersdue to the SMAC (social, mobile, analytics, and cloud) revolution, it has the potential to deliver significant sales.

Intel continues to believe that this segment will grow by more than 15% in 2015—driven by growth in the networking, cloud, and storage space.

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Datacenter’s key drivers’ performance in 2Q15

On a quarter-over-quarter and YoY basis, unit volumes in this segment grew by 2% and 10%, respectively. The average sales price rose by 3% and 4% on a quarter-over-quarter and YoY basis, respectively. As a result, Intel can generate volume and obtain significant payments for its products in the DCG segment.

Intel’s DCG segment provides specific and optimized solutions for the enterprise, cloud, communications infrastructure, and technical computing segments. Facebook (FB), Google (GOOG), eBay (EBAY), Microsoft (MSFT), and other web players are key customers of custom Intel server CPUs (central processing units).

According to Bill Kreher, an analyst at Edward Jones, “The data-center growth continues to keep the bears at bay.”

If you’re bullish about Intel, you can invest in the Technology Select Sector SPDR Fund (XLK) to gain exposure to Intel. Intel accounts for about 3.55% of XLK.


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