If you go to Intel's (NASDAQ:INTC) investor relations website, you'll find that the company has a link to a processor price list that it updates periodically. The last update was on Oct. 8, 2018. 

On that list, you'll find that the company's latest Xeon Scalable processors -- which come in a multitude of configurations ranging from four cores to 28 cores -- are priced anywhere from $213 for the lowest-end part to $13,011 for the fastest 28-core chip. 

Intel Xeon Scalable chips in front of a wafer of Xeon Scalable chips.

Image source: Intel.

Based on these list prices, you might think that the average selling price for Intel's Xeon server processors is well into the thousands of dollars. However, on its most recent earnings call, Intel revealed a metric that shows just how out of touch with reality that price list actually is. Allow me to explain.

Some background

On Intel's most recent earnings call, CFO and interim CEO Bob Swan revealed that the company shipped "more than 8 million CPUs into an annual server, storage, and network CPU [total addressable market] that is greater than 30 million units." 

Intel breaks down its data center group (DCG) revenue into two buckets: platform and adjacency. Platforms, Intel explains in its most recent earnings release, "incorporate various components and technologies, including a microprocessor and chipset, a stand-alone [system-on-a-chip], or a multi-chip package." 

Adjacency products consist of Intel's "remaining primary product lines," which in the case of DCG include things like 3D XPoint memory modules, Ethernet products, and silicon photonics products.

Armed with this knowledge, we can now figure out the average selling price of an Intel Xeon processor. 

The magic number

In the third quarter of 2018, Intel reported that its DCG platform revenue was $5.64 billion -- up about 27% from the same quarter a year ago. 

To figure out an approximate average selling price for Intel's DCG platforms, we simply divide that revenue figure by 8 million to arrive at $705. Also keep in mind that Intel said "more than 8 million," so this price estimate is going to be a little on the high side of things. 

The point, though, is that we're in the right ballpark. 

Now, to be fair, Intel doesn't sell just its latest Xeon Scalable processors into the data center. It sells Atom-based products (processors that are generally cheaper than their Xeon brethren) into several markets, and -- as it showed at its August Data Centric Innovation Summit event -- Intel is still selling its last-generation Xeon Processor v4 chips and is even still moving some of its two-generation-old Xeon Processor v3 chips. 

Nevertheless, the point is that there's a big gap between the list prices that Intel prints and what its major customers are actually paying. 

Looking ahead

Intel doesn't typically offer revenue guidance by segment but Swan actually provided DCG guidance on the last earnings call, saying that "[we] expect DCG to set another revenue record of approximately $6.3 billion in the fourth quarter." 

Based on that guidance, the company is calling for year-over-year revenue growth of about 12.9%. That's a slowdown from the roughly 25.5% revenue growth that DCG has enjoyed over the first three quarters of the year -- something that Swan explained is due to "a much tougher [comparison] because [the] fourth quarter last year was a great quarter for the DCG business."

Although Intel's list prices and real world chip prices don't really mesh, the trend in Intel's data center platform average selling prices has been up over the course of 2018, driving a significant amount of the growth in overall DCG platform revenue that the company enjoyed this year.

Indeed, according to Intel's most recent earnings release, over the first three quarters of 2018, DCG platform unit volumes rose 15% and average selling prices grew 10%. 

I look forward to seeing how both average selling prices and unit volumes move in the fourth quarter of 2018 and how they trend over the course of 2019.

Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.