UPDATED 01:15 EDT / OCTOBER 14 2015

NEWS

Intel’s cloud growth glosses over disappointing Q3 results

Intel posted yet another dreary set of financial results in its third quarter earnings report yesterday, though the company may have found a bright spot thanks to its continued growth in the cloud.

Intel CEO Brian Krzanich revealed in the earnings call that the chipmaker’s revenues hit $14.5 billion for the quarter, resulting in a net income of $3.1 billion – a six percent decline from one year ago. He also revealed slightly slower sales than a year ago, with a gross margin of 63 percent, down two points from last year. Earnings per share were down three percent to $0.64.

Nonetheless, those results were better than Wall Street’s expectations. Analysts had predicted revenues of $14.2 billion and earnings of $0.59 per share.

Not surprisingly, Krzanich seized on this to proclaim the latest quarter as a mild success. “”We executed well in the third quarter and delivered solid results in a challenging economic environment,” the CEO said in prepared remarks.

The big bugbear for Intel is the declining PC market, and once again sales were down. The segment still accounts for over half of Intel’s revenues, but those revenues were declined by seven percent from one year ago. Sales to tablet manufacturers meanwhile, saw a “double digit” drop (Krzanich didn’t say exactly how big a drop, but The Register claims its heard rumors of a stunning 32 percent decline in this particular market).

About PCs, Krzanich said he was still optimistic that Windows 10, combined with Intel’s new Skylake chips, might help to reverse the decline soon. While there’s no evidence to back up this optimism, Krzanich said it’s still too early to make any predictions.

“You should look at the ability to upgrade to Windows 10 today, actually on-shelf upgraded systems aren’t available until later this month,” he said. “Some of these transitions are going to take some time, so I’m very cautious to say how fast and when.”

The one big bright spot for Intel (and the one segment that may just save its ass in the long-term) came in the data center, where accelerating growth saw it claw back revenues lost in other areas – CFO Stacey Smith said revenues rose by 12 percent to $4.1 billion for the quarter compared to one year ago.

“Overall, we’re seeing a weak PC client business being offset by strong growth in the data center, memory, and IoT businesses,” Smith explained. “We’re much less dependent on the PC segment that we’ve historically been.”

“Given a very weak PC market, Intel did well on revenue, gross margin and EPS, balanced out by datacenter and memory,” said Patrick Moorhead, principal analyst at Moor Insights and Strategy, in an interview with Business Insider. “Their diversification plan appears to be paying off with their long-standing investments into flash, cloud servers, storage, and networking.”

But no matter how Moorhead and Krzanich see it, Intel’s investors were less than impressed – at the close of trading the company’s shares were down by more than three percent.

Image credit: Skitterphoto via pixabay.com

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