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Intel Is Set to End 2018 with Record Revenue

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A record revenue year

Intel (INTC) has witnessed a record year in 2018, as it’s set to report double-digit revenue growth for the first time in seven years. Even Intel didn’t expect such high growth, which is visible in its revision of its 2018 guidance.

The company has raised its 2018 revenue guidance three times in the last nine months, first from its original guidance of $65 billion to $67.5 billion, then to $69.5 billion, and now to $72.1 billion—a rise of 13.4% YoY (year-over-year). Intel expects its data-centric revenue to rise ~20% YoY and its PC-centric revenue to rise ~9% YoY in 2018.

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The company’s revenue growth is being driven by unexpected demand in the PC and data center markets. In the first three quarters of 2018, Intel’s data center revenue rose 23.6%, 27%, and 25.8% YoY, respectively, up from its previous guidance in the high teens. For the fourth quarter, Intel expects its data center revenue to rise 12.5% YoY and its overall revenue to rise 11% YoY.

Intel’s revenue drivers

In the third quarter, Intel’s PC-centric business rose 15.5% YoY to a record $10.2 billion as demand revived in the PC space. Gartner’s preliminary data showed that third-quarter PC shipments rose 0.1% YoY to 67.2 million units driven by strong demand from businesses as they migrated to Microsoft’s (MSFT) Windows 10 operating system.

Expanding TAM

Intel is also seeing growing demand from its expanded total addressable market, which includes adjacent products such as silicon photonics, fabric, network application-specific integrated circuits, and 3D XPoint memory.

On Intel’s third-quarter earnings call, CFO and interim CEO Robert Swan stated that Intel’s first Optane DC persistent memory modules had been adopted by large cloud companies such as Google (GOOG), Microsoft, and Alibaba. Companies such as Taboola and Rolls-Royce have selected its Xeon server processors over graphics processing units for their inference workloads. Intel-owned Mobileye secured eight new design wins from major automakers in the third quarter, increasing its total design wins for 2018 to 20.

Intel expects the strong demand in the PC and other markets to drive its fourth-quarter revenue 11% YoY to ~$19 billion. However, Swan expects the company’s 2019 growth rate to slow. We’ll look into this next.

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