A record year for Intel
Last year was a strong one for Intel (INTC). In 2018, it reported impressive growth in the PC and data center markets, from which it earns more than 85% of its revenue. Its global PC sales rose in the second and third quarters driven by strong demand from businesses as they migrated to Microsoft’s (MSFT) Windows 10 operating system.
An unexpected increase in PC sales created a supply shortage at the chip maker, which prioritized orders for high-end PC and server CPUs, leaving the mid- and low-range segments to be catered to by rival Advanced Micro Devices (AMD).
Intel’s fourth-quarter revenue estimates
Considering the supply shortage, Intel expects its fourth-quarter revenue to fall 1% sequentially but to rise 11.1% YoY (year-over-year) to $19.0 billion. If we consider Intel’s sequential revenue trend, we can see that its third and fourth quarters are seasonally strong. This could be the first time in more than three years that Intel reports a sequential decline in the fourth quarter—simply because it didn’t have sufficient capacity to meet demand.
The company’s 1%—or $190 million—sequential revenue fall is expected to come from a 15% sequential decline in its IoTG (Internet of Things Group) revenue, as it has prioritized data center and PC chips over IoTG chips. The company could also see a fall in revenue from modem chips. In the third quarter, Intel earned ~$1 billion in revenue from Apple (AAPL). In early January 2019, Apple reduced its December 2018 quarter’s revenue guidance from $91 billion at the midpoint to $84 billion, all of which it attributed to weak demand in China. Weak Apple revenue will also likely slow modem revenue growth for Intel.
Next, let’s look at Intel’s full-year revenue.