Image source: Intel.

Intel (INTC 1.11%) reported second-quarter results on July 20. Here's how the quarter worked out.

Intel's second-quarter results: The raw numbers

 Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Revenue

$13.5 billion

$13.2 billion

2.6%

Net income

$1.3 billion

$2.7 billion

(50.8%)

GAAP EPS

$0.27

$0.55

(51%)

Data source: Intel.

What happened with Intel this quarter?

Results matched Intel's guidance for the quarter, after backing out restructuring charges from the bottom line which come from the planned layoff of 12,000 Intel employees. Intel is refocusing on the data center and Internet of Things markets.

  • The restructuring costs landed at $1.4 billion, roughly 15% higher than the anticipated $1.2 billion charge. Management now expects to post another $200 million charge for this strategic shift in coming quarters, lifting the total bill to $1.6 billion.
  • Restructuring costs are backed out of Intel's adjusted earnings. On the upside, management sees the effort unlocking some $750 million in cash saving this year, and $1.4 billion of lower annual costs starting in 2017.
  • Sales in the client computing group fell slightly from year-ago levels, while data center revenue posted modest increases. Together, these two segments held sales steady year over year, representing 84% of Intel's total sales.

Intel provided a detailed rundown of expectations for the third quarter, along with updated projections for the full fiscal year.

  • Third-quarter sales are seen rising 3% year over year to $14.9 billion. At the midpoint of Intel's estimated ranges for expenses and margins, GAAP net income should fall approximately 10% year over year to $3.0 billion. That works out to roughly $0.61 per share. Non-GAAP adjustments would add something like $0.03 per share on the bottom line.
  • For the full year, most targets were unchanged from the levels set three months ago. Exceptions to that rule include the higher resturucturing costs we already discussed and a lower tax rate due to increased R&D tax credits.

What management had to say

Intel CEO Brian Krzanich liked what he saw in the second quarter.

Our restructuring initiative to accelerate Intel's transformation is solidly on track. We're gaining momentum heading into the second half. While we remain cautious on the PC market, we're forecasting growth in 2016 built on strength in data center, the Internet of Things and programmable solutions.

Looking ahead

The company's strategic shift is a reaction to the ever-changing market landscape in the computing sector.

These days, traditional desktop and laptop systems are losing market share to sleeker tablet PCs and beefy smartphones. Those mobile tools still rely on cloud computing servers to deliver data and do heavy number-crunching. Both of these tasks were formerly the domain of PC workstations, but the workload is moving deeper into the cloud.

The Internet of Things is another play on the same trend, where a plethora of data-collecting gadgets such as networked running shoes and jet engine sensors send their information to central data centers for further processing.

Intel is already the undisputed leader in data center processor sales, which is turning into the company's most important business division. The IoT effort will expand on server systems, adding low-power networking tools and ultra-light processors for the embedded space.