Strong Server Market & Cloud to Aid Intel (INTC) Q1 Earnings

IntelINTC is scheduled to report first-quarter 2018 results on Apr 26.

The company had an intimidating beginning to the first quarter, after security flaws - Meltdown and Spectre - were unveiled by Project Zero Researchers, a division of Alphabet GOOGL . The company immediately launched patches in response to the flaws, which were also criticised for slowing down systems.

DCG Benefits from Server Market Rebound

We expect robust performance from the data centric part to drive results. Data Center Group ("DCG"), Internet-of-Things Group, Non-Volatile Memory Solutions and Programmable Solutions Group form the crux of the company's data-centric business model.

The rebound in Server market bodes well for Intel. According to market research firm IDC's latest data, worldwide server revenues jumped a whopping 26.4% year over year to $20.7 billion in fourth-quarter 2017, while overall shipment grew 10.8% to 2.84 million units.

Intel Corporation Revenue (TTM)

Intel Corporation Revenue (TTM) | Intel Corporation Quote

Per IDC, the availability of Intel's Purley processors and AMD's EPYC processors is one of the reasons behind the upsurge. The market firm noted that hyperscale data-center service providers like Amazon AMZN , Alphabet and Facebook FB continued their server deployment efforts to grab market share in the cloud service space.

Moreover, Gartner's latest forecast for IT spending depicts a favorable tech spending environment which we believe will positively influence the overall server market in the near term. The higher spending is likely to boost Intel's top-line growth in the to-be-reported quarter.

Click here to know how the company's overall Q1 performance is likely to be.

Growth Projections Robust

Intel expects data-centric part of the business to grow in the mid-teens range. Apart from strong on-going demand for public clouds, the company is also anticipated to benefit from strength in on-premise and hybrid cloud build-outs.

The drive to lower cost for computing devices is increasing the pressure on servers that are taking the load off these devices. Intel has made significant advancement in data center and cloud business as it is now offering more integrated solutions that are likely to be competitive on a cost per watt basis.

The company's investments in field programmable gate array (FPGA) for acceleration (dramatically increases performances at very low power) and memory to reduce latency and increase speeds are helping it develop custom solutions for big players.

During the quarter, Intel launched Xeon D-2100 processor, a system-on-chip (SoC) processor that addresses the needs of edge applications and other data center or network applications constrained by space and power.

Intel's Movidius vision processing has also gained strong adoption rapidly. The processor was selected by Alphabet's Google division to develop its AIY vision kit. Amazon is also using the processor in its DeepLens, the world's first deep learning enabled video camera for developers.

The Zacks Consensus Estimate for Data Center Group ("DCG") currently stands at $4.82 billion higher than $4.23 billion in the year-ago quarter.

Currently, Intel carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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