Intel’s strong 2018 growth will be a headwind in 2019
Intel (INTC) saw impressive growth in 2018 on the back of unexpected demand from the PC and data center markets. It beat its 2018 revenue and earnings guidance by a wide margin, reporting double-digit annual revenue growth after a long time.
Intel’s 2018 revenue rose 13% YoY (year-over-year) to $70.8 billion, beating its original guidance by $5.8 billion. This strong growth is expected to become a headwind for Intel in 2019, as it will be difficult for the company to beat its 2018 record earnings, especially when end consumer demand is slowing and competition from Advanced Micro Devices (AMD) is intensifying.
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Intel to report weak first-quarter earnings
Intel expects its first-quarter revenue to fall 14% sequentially to $16 billion, greater than the normal seasonal fall of 6%–10%. It expects its PC-centric revenue to rise in the low single digits YoY due to the inclusion of a higher modem share for Apple’s (AAPL) iPhones. It expects its data-centric revenue to fall in the low single digits due to weak demand from the cloud compared to last year.
Intel expects its profit margins to fall in 2019 as it transitions to a 10 nm (nanometer) manufacturing node and increases its mix of lower-margin-adjacent products, such as modems and silicon photonics. These two manufacturing changes will increase Intel’s costs in 2019, while its revenue will likely remain unchanged due to weak demand.
This year will be the true test of Intel CEO Bob Swan’s financial expertise. The company also has a new chief financial officer, George Davis. He could shed some light on his plans for the company in its upcoming first-quarter earnings results, which are scheduled for release on April 25.