Must-know: What to expect from Intel’s 2Q14 earnings

Market Realist

Overview: What to expect from this week's tech sector earnings (Part 2 of 8)

(Continued from Part 1)

Intel’s results in 1Q14 were largely in-line with expectations

In the previous part of the series, we discussed stock price performances for the companies that are going to report their second quarter earnings this week. Intel (INTC) is going to report its 2Q14 earnings on July 15 after market close hours. Its earnings reports are widely considered a barometer of the overall tech industry’s health. In 1Q14, Intel’s revenues of $12.8 billion were in line with Wall Street expectations, but the earnings per share (or EPS) of $0.38 were better than analysts’ expectation of $0.37 per share. Intel’s results benefited from a slower-than-expected personal computer (or PC) market decline, strong growth in data centers, and the newly reported segment Internet-of-Things.

Intel benefited from stronger than expected demand from business PCs in 2Q14

Intel continues to dominate the PC processors market, with AMD (AMD) a distant second in this space. During the second quarter, Intel announced that it’s raising its revenue outlook for the quarter from an earlier predicted $13 billion to $13.7 billion. Intel also increased its gross margin outlook from an earlier predicted 63% to 64%. Intel mentioned that stronger than expected demand for business PCs helped it revise its guidance.

According to a report from Gartner and as the above chart shows, worldwide PC shipments increased by 0.1% in 2Q14 after eight quarters of consecutive decline. Lenovo (LNVGY), HP (HPQ), Dell, and ASUS all managed to increase their PC shipments. The main reason for increased demand from business PCs was the end of Windows XP support from Microsoft (MSFT) on April 8, which led to a PC refresh cycle from businesses.

Continue to Part 3

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