Revenue in 2018
Intel (INTC) reported strong revenue growth in the PC and data center spaces in the first three quarters of 2018. It witnessed strong demand in the fourth quarter as well, partially offset by a CPU supply shortage.
The company is set to report double-digit growth in its annual revenue for the first time in seven years. For 2018, it expects its revenue to rise 13.4% YoY (year-over-year) to $72.1 billion, with its data-centric revenue expected to rise ~20% YoY and its PC-centric revenue expected to rise ~9% YoY.
Revenue in 2019
While 2018 was a strong year for the semiconductor industry, the case might be different in 2019. The semiconductor industry is undergoing a slowdown due to excess inventory, a weak macroeconomic environment, and seasonality in the first half of 2019. This weakness could see many chip companies report greater-than-seasonal declines in the first quarter. TSMC (TSM) and Micron Technology (MU) expect their current quarters to record their steepest sequential revenue declines in ten years.
On its third-quarter earnings call, Intel’s management stated that it couldn’t sustain a double-digit growth rate in 2019 given its high revenue in 2018. Bank of America analyst Vivek Arya expects Intel’s 2019 revenue to rise 2.5% YoY to $73.9 billion even during the semiconductor industry slowdown. He stated that Intel’s exposure to the more stable PC, enterprise, networking, and data center markets would shield it from the slowdown.
Apart from the semiconductor industry slowdown, Intel will face several challenges as its rival Advanced Micro Devices (AMD) overtakes it in terms of process nodes and gains share in the CPU market. Intel will also have to manufacture its own 3D XPoint-based memory chips as Micron exercises its option to buy a complete stake in the flash memory joint venture.
The above challenges will affect Intel’s profitability in 2019. We’ll look at Intel’s profitability next.