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What’s Driving Growth in Intel’s Data-Centric Business?

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Intel’s data-centric business

Intel (INTC) is reaping the benefits of its transition to a data-centric business. The company reported strong growth in the data center market. As the world moves towards AI (artificial intelligence), Intel is working on delivering an end-to-end platform that brings computing and data analytics from data to edge devices.

Thus, Intel added FPGA (field programmable gate array), NVM (Non-Volatile Memory) chips, and IoT (Internet of Things) processors to its offerings. These three segments reported 18% YoY (year-over-year) growth in revenue in 1Q18 with the memory business achieving a revenue milestone of $1 billion. Intel’s last division to reach this level was its Data Center Group ten years back.

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Non-Volatile Memory Solutions Group

Intel returned to the memory business by transitioning its Dalian facility in China to manufacture 3D NAND (negative AND) and 3D XPoint. It also ended its NVM partnership with Micron Technology (MU) to align its memory business with its overall business objective. Intel reports its memory business under NSG (Non-Volatile Memory Solutions Group).

NSG revenue rose 15.5% YoY and 12.5% sequentially to $1 billion in fiscal 1Q18 driven by strong demand for data center SSD (solid state drive) solutions. Intel also expanded its 3D XPoint products with the launch of mainstream Optane SSDs for clients. It expects 3D NAND supply and demand to see balance in 2H18, thereby slowing revenue growth.

NSG’s operating losses reduced from $129 million in 1Q17 to $81 million in 1Q18 as the transition to 64-layer 3D NAND reduced production costs. Intel expects NSG to turn profitable in full-year 2018.

Programmable Solutions Group

Intel acquired FPGA supplier Altera in 2016 and created PSG (Programmable Solutions Group). PSG revenue rose 17% YoY to $498 million, and operating profit rose 5% YoY to $97 million in fiscal 1Q18. The revenue growth was driven by strong demand from data center and embedded customers.

The division secured record design wins in 1Q18 including one from Microsoft (MSFT), which is using Intel’s FPGAs to provide real-time AI for its new Bing Intelligent Search.

Internet of Things Group (or IoTG)

IoTG revenue rose 16.5% YoY to $840 million driven by strong demand from the Retail and Bideo segments. IoTG’s operating profit rose 116% YoY to $227 million in fiscal 1Q18 as Intel divested its Wind River business and shifted its ADAS (advanced driver-assistance systems) investments to Mobileye, which is reported in the All Others segment. Mobileye business earned revenue of $151 million and secured a high-volume design win for EyeQ5 from a European premium vehicle manufacturer.

Overall, Intel’s data-centric business is progressing fast and is expected to lift the overall company’s earnings in the coming quarters.

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