Intel's (INTC) Q3 Earnings: CCG, DCG & NSG in Spotlight
Intel INTC is scheduled to report third-quarter 2018 results on Oct 25.
Data Center Group or DCG, Client Computing Group or CCG, and MobilEye form the crux of Intel’s data-centric business model, which comprised almost 50% of the company’s top-line in the second quarter.
The company’s Non-Volatile Memory Solutions or NSG segment is also anticipated to be a key growth driver.
Click here to know how the company’s overall third-quarter performance is expected to be.
CCG — Trend Upbeat
Intel bundles PCs, notebooks, 2-in-1s, tablets and other computing devices under the Client segment, which aids comparison with the PC market numbers provided by IDC and Gartner.
CCG accounted for 51.5% of second-quarter revenues. The segment revenues increased 6.3% on a year-over-year basis and 6.2% sequentially to $8.73 billion. Strength in notebook (up 6%), desktop (up 6%) and modem was reflected in year-over-year growth.
Further, strength in the commercial and gaming business is a positive. Additionally, with a view to offer an ultra-portable laptop experience, the company introduced new 8th Gen Intel Core processors in the quarter under review.
Intel’s dominance in CPU market is anticipated to improve with the new processors for sleek laptops. The new CPUs are likely to pave the way for ultra-thin PCs.
Moreover, strong product mix and higher ASPs on the back of customer preference are anticipated to boost CCG operating margin in the third quarter.
The Zacks Consensus Estimate for CCG is pegged at $9.289 billion, representing growth of almost 5% from the year-ago quarter.
Intel Corporation Revenue (TTM)
Intel Corporation Revenue (TTM) | Intel Corporation Quote
DCG— Deserves a Special Mention
We expect robust performance from the data centric part to drive results. Management stated that data-centric businesses were up 26% collectively, with each business individually growing in double digits.
DCG accounted for 32.7% of second-quarter revenues. The segment revenues surged 26.9% year over year and 6.1% sequentially to $5.55 billion. Platform volumes increased 14%, while platform ASP was up 11% on a year-over-year basis. Growth was broad-based with strong demand for high-performance products (including Xeon Scalable) driving ASPs.
Per Intel, the Cloud business revenues, largest Data Center segment, advanced 41%. Enterprise & Government was up 10%. Commercial service provider revenues grew 30%.
Intel’s strategy of expanding TAM beyond CPU to adjacent product lines like silicon photonics, fabric, network ASICs, and 3D XPoint memory is likely to be a tailwind.
The Zacks Consensus Estimate for DCG is pegged at $5.942 billion, representing growth of almost 22% from the year-ago quarter.
NSG — Rides on SSD Demand from Data Centers
Robust demand for Optane SSDs for clients and 3D NAND technologies specifically designed to support data centers, are expected to bolster Intel’s NSG segment revenues in the to-be-reported quarter.
Further, sturdy demand for higher capacity storage solutions is expected to be a tailwind.
NSG accounted for 6.4% of second-quarter revenues. The segment revenues jumped 23.5% year over year and 3.8% sequentially to $1.08 billion on the back of strong demand for data center SSD solutions.
The transition to 64 layers 3D NAND is anticipated to improve cost, eventually bolstering the segment’s margin expansion.
In the quarter under review, Intel unveiled a new SSD with storage capacity of 32 terabytes (TB). The latest compact drive, developed on the company’s 3D NAND technology, is claimed to be Intel’s “densest drive ever”. Notably, the new SSD has already witnessed adoption from notable companies, comprising Microsoft MSFT, International Business Machines IBM, Tencent, to name a few.
The Zacks Consensus Estimate for NSG unit is estimated to be $1.156 billion, representing growth of almost 30% from the year-ago quarter.
Zacks Rank and Key Pick
Intel carries a Zacks Rank #3 (Hold).
Vishay Intertechnology, Inc. VSH is a stock worth considering from the same sector. It flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Vishay Intertechnology has a long-term earnings growth rate of 9.2%.
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