Intel (INTC) to Report Q2 Earnings: DCG, CCG & NSG in Focus
Intel INTC is set to release second-quarter 2020 results on Jul 23.
The chipmaker’s second-quarter performance is expected to have benefited from strength in its data center business, courtesy of growing adoption of cloud-based solutions amid the coronavirus crisis-induced work-from-home wave.
Solid momentum of its latest high-performance Xeon processors, and growing adoption of IoT applications may have contributed to the to-be-reported quarter’s performance.
Moreover, encouraging trend in PC shipments in the second quarter, driven by increased demand and improvement in the supply chain is likely to have benefited second-quarter performance.
However, stiff competition from Advanced Micro Devices AMD and Xilinx XLNX is likely to have put pricing pressure and limited margin expansion. Markedly, AMD is gaining from robust uptake of its second-generation EPYC server processors.
In a bid to maintain its competitive position and improve ASPs, Intel is increasing investments on infrastructure, product development and platform. These factors are likely to have affected profitability in the second quarter.
Click here to know how the company’s overall second-quarter performance is expected to be.
Work-From-Home Push to Boost Data-Centric Business
Intel’s data-centric business model primarily comprises the Data Center Group (“DCG”), Internet of Things Group (“IOTG”), Non-Volatile Memory Solutions (“NSG”), Programmable Solutions Group (“PSG”) and other business units.
Intel’s second-quarter performance is expected to have benefited from strength in its data center business, on account of growing adoption of cloud-based solutions amid the coronavirus crisis-induced work-from-home wave.
Rise in demand from Cloud service providers (CSP) and strength in high-performance second-generation Xeon Scalable processors might have driven DCG performance in the quarter to be reported.
Notably, the Zacks Consensus Estimate for DCG revenues currently stands at $6.459 billion, indicating an improvement of 29.6% from the year-ago quarter.
Intel Corporation Revenue (Quarterly)
Besides, strength in memory vertical owing to cloud storage demand, and improvement in NAND pricing trends are anticipated to get reflected in NSG segment’s second-quarter performance. Also, the company’s non-volatile memory business is likely to have benefited from momentum in Optane modules.
Markedly, the Zacks Consensus Estimate for NSG revenues is currently pegged at $1.325 billion, indicating an improvement of almost 41% from the prior-year quarter.
Meanwhile, PSG segment is also anticipated to report growth in the second quarter. The Zacks Consensus Estimate for PSG revenues currently stands at $507 million, suggesting growth of 3.7% from the prior-year reported figure. Strength in cloud and enterprise verticals are likely to have positively impacted the segment.
Further, Mobileye’s new ADAS wins and increasing proliferation of IoT are anticipated to have contributed to Intel’s IoT businesses in the to-be-reported quarter.
However, impending global recession is likely to have affected IOTG end markets, especially retail and industrial. Further, lower automotive production due to lockdowns remained a concern for Mobileye.
The Zacks Consensus Estimate for IOTG revenues currently stands at $825 million, indicating decline of 30.5% from the prior year reported figure.
Client Computing Segment to Gain from Growth in PC Shipments
Intel’s PC-centric business is represented by this segment. Notably, Intel bundles PCs, notebooks, 2-in-1s, tablets and other computing devices under the Client Computing Group or CCG segment.
Incremental adoption of the latest processors from Alphabet’s GOOGL Google, Microsoft, among others, are anticipated to get reflected in the second-quarter results.
Moreover, new design wins for its first 10-nanometer (nm) mobile CPU, dubbed Ice Lake, is likely to have been a tailwind for Intel, currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Furthermore, growth in PC shipments in the second quarter is likely to have benefited CCG segment revenues. Per Gartner’s preliminary data, PC shipments in second-quarter 2020 improved 2.8% year over year to 64.8 million units.
Markedly, the Zacks Consensus Estimate for CCG is currently pegged at $9.12 billion, indicating an improvement of 3.2% from the year-ago reported figure. Further, the consensus estimates for CCG-Platform revenues stands at $8.065 billion, suggesting growth of 1.8% from the year-ago reported figure.
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