At ~$60 billion in annual revenues, Intel (INTC) has grown to become the world’s largest semiconductor company. However, Samsung’s (SSNLF) semiconductor business is likely to replace Intel at the top position—if the memory market environment remains favorable. Meanwhile, Intel’s large size has made it a mature stock and reduced its growth rate.
As seen from the above graph, Intel’s quarterly revenue has grown by single digits over the past two years, while rivals Advanced Micro Devices’ (AMD) and NVIDIA’s (NVDA) revenues grew by high double digits.
Behind Intel’s slow revenue growth rate
In dollar value terms, Intel’s revenues have grown significantly faster than those of its rivals, but on a percentage basis, its revenue growth rate is lower than those of its rivals because Intel’s base revenue is already so high.
Intel’s fiscal 3Q17 revenues rose 2% YoY (year-over-year) to $16.2 billion, beating its own guidance of $15.7 billion. In dollar terms, Intel’s revenues rose $350 million on a YoY basis, while AMD’s revenues rose 26% YoY, or by $336 million, to ~$1.6 billion. NVIDIA’s revenues rose 32% YoY, or by $632 million, to $2.6 billion.
The above figures show that both Intel’s and AMD’s revenues have risen by ~$350 million, but their growth rates have varied from 2% to 26% because Intel’s base revenue is $15 billion, compared with AMD’s base revenue of $1.3 billion.
Revenue growth drivers
Intel’s data-centric business revenues grew 15% YoY in fiscal 3Q17, which offset the flat revenue growth in its PC (personal computer) business. It reported record revenues in its data center, IoT (Internet of Things), and memory businesses. Its memory and IoT business reported the strongest growth of 37% and 23%, respectively, on a YoY basis.
In the first nine months of fiscal 2017, Intel saw revenues of $45.7 billion, compared with $43 billion in the first nine months of fiscal 2016. But fiscal 3Q and fiscal 4Q are seasonally strong quarters for Intel. It expects its fiscal 4Q17 revenues to remain flat at $16.3 billion.
Given the strong demand across all segments, Intel has increased its fiscal 2017 revenue guidance from $60 billion to $62 billion, which would represent a growth of 4.4% YoY. Meanwhile, Intel CEO (chief executive officer) Brian Krzanich assured investors that more innovation is on the way in the areas of AI (artificial intelligence) and autonomous driving.
Intel’s shares have been flat throughout 2017, and the company has guided flat revenue growth for fiscal 2017. But its recent revision in guidance has revived investor optimism, sending the stock up 7.3% one day after its fiscal 3Q17 earnings were released.
Next, we’ll look at Intel’s operating efficiency.