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Can Intel Corp. Hit Its Stride in 2018?

By Anders Bylund - Apr 25, 2018 at 9:23AM

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2018 is the midpoint of the chip giant's three-year strategic makeover plan. Here's what to expect from Thursday's first-quarter report.

Semiconductor titan Intel (INTC -1.19%) is gearing up for the release of its first-quarter results, scheduled for the evening of April 26. Chipzilla set up fairly modest guidance goalposts for this report, aiming for the lowest top-line growth seen since the end of 2015.

Let's have a closer look at Intel's first-quarter targets and the reasoning behind them.

Guidance and estimates

In the first quarter of fiscal year 2018, Intel expects to record revenues of roughly $15 billion, just 1.4% above the year-ago period. On the bottom line, GAAP earnings should land near $0.65 per share. That would be a 7% improvement over the same quarter of 2017.

Some investors have worried about Intel's first-quarter sales coming in approximately 12% below the fourth-quarter result, which would be a much steeper decline than the 8% to 9% the company has experienced in recent years.

Feeding into that unusual slope, the enterprise computing group ended the previous fiscal year on a stronger note than expected thanks to large volumes of data center product sales. Furthermore, the programmable solutions group formerly known as Altera enjoyed an artificial revenue boost last quarter thanks to a few popular but aging products sailing into the sunset. Their replacements will take a while to fill those shoes, and some customers stocked up on the end-of-life products while they still could.

The guidance targets above assume continued solid growth in Intel's data center and memory operations with single-digit declines in PC-related sales, year over year. This will be the first quarter of effective tax rates near 14%, down from 21% in recent years.

An Intel Core X-series chip, laid out on a plain white backdrop.

Image source: Intel.

The bigger picture

Intel's management sees 2018 as the second year of a three-year transformation period. The company is still working on the integration of the $17 billion Altera buyout and the $15 billion Mobileye acquisition, not to mention large tweaks to the company's data security and memory chip businesses.

The focus these days is on what Intel's management calls data-centric businesses, which includes both powerful, number-crunching processors and nimble chips for embedded or mobile markets. The old PC-based business model is fading -- perhaps slower than some market analysts might have expected in recent years, but still inexorably.

In 2018, Intel CEO Brian Krzanich hopes to stake a large claim on the emerging market for 5G wireless solutions, just as telecoms around the world move on from planning and standards-setting to actual deployment of these faster and more reliable technologies. Look for more detail on Intel's 5G-oriented plans in this earnings release and analyst call.

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