It took a while to get going in 2017, but the second half of the year may prove to be a watershed period in Intel's (NASDAQ:INTC) storied history. Intel CEO Brian Krzanich seemed to have lost some investors' confidence as the company plunged ahead with its transition away from PC chips.

Intel's data center first philosophy is taking hold, and it is easily the second-largest unit as measured by revenue. Forays into cutting-edge opportunities including the Internet of Things (IoT), commercial drones, artificial intelligence (AI), and wearables are gaining steam. Better still, the momentum Intel gathered exiting 2017 will likely continue when it reports year-end results Jan. 25.

Picture of a lady at the beach standing upright with her arms to make the one in a 2017 structure.

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On a record-setting roll

The last couple of earnings releases were littered with record performances, capped off with Intel's third-quarter 2017 results. Total revenue was up 6% to $16.1 billion, largely due to record-breaking revenue from Intel's data center, IoT, and memory divisions.

Could you imagine Intel posting outstanding quarterly results despite so-so PC sales even a year ago? That's exactly what Intel did last quarter with PC-related revenue of $8.9 billion -- flat year over year. The PC unit's lack of growth was more than compensated for by the 7% increase in data center sales to $4.9 billion and whopping 23% jump in IoT revenue to $849 million.

The programmable solutions division, which is closely tied to Intel's IoT offerings, was up 10% to $469 million. Though it lacks the pizzazz of IoT, drones, and AI, there is also significant growth potential for another of Intel's core units: nonvolatile memory. Intel's memory group revenue rose 37% to $891 million and is now its third-largest unit.

Nonvolatile memory is a type of computer memory that stores saved data even without a power supply. Nonvolatile memory sales are expected to skyrocket in the coming years because of the plethora of consumer electronic devices worldwide, and in order to meet enterprise storage needs, which include Intel's bread-and-butter, data centers.

One estimate suggests the nonvolatile memory market will be worth $80.54 billion by 2022, and Intel already has a leg up. Memory, along with data centers, IoT, and programmable solutions now make up 44% of Intel's total revenue. The improving revenue, product diversification, and strength of Intel's growth drivers are why Intel crushed it in 2017. But those aren't the only reasons.

Close-up picture of an embedded computer chip.

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Competition is heating up

Long known for its graphics processing units (GPUs) targeting the world's gaming devices, high-flying NVIDIA (NASDAQ:NVDA) is gaining momentum in many of Intel's key units. Even before NVIDIA introduced its new AI-driven Tensor RT platform last quarter, CEO Jensen Huang was already citing outstanding data center growth as a reason for its record-setting revenue.

Smart cars is another market in which Intel and NVIDIA are going head-to-head, along with other providers. Intel is the dominant data center provider, but relative upstarts including NVIDIA are slowly making their presence felt.

Profits, anyone?

Due to both increased operating margins and the paring of overhead, Intel also enjoyed record operating income of $5.1 billion in the third quarter, up 15% year over year. Cutting expenses has been a core objective of Intel's, and it demonstrated again it's able to grow where it counts and trim costs at the same time.

For the third quarter, operating expenses were down 10.5% compared to a year ago to $4.94 billion. For the first nine months of 2017, operating expenses sank 11% to $15.76 billion. The winning combination of higher revenue and lower overhead resulted in another Intel record, this one for earnings per share (EPS). Last quarter's EPS of $0.94 obliterated the $0.69 a share Intel reported a year ago.

As much as Intel crushed it in 2017, it has yet to hit the full potential its new-ish solutions represent. The momentum it has already built is outstanding, making the prospects for 2018 even more intriguing. The icing on the cake is that Intel remains woefully undervalued by most every metric relative to its peers, and its dividend yield of 2.4% is one of the highest.

Tim Brugger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.