UPDATED 19:03 EDT / JANUARY 26 2017

INFRA

Intel posts strong earnings with major growth in Internet of Things

Chip maker Intel Corp. reported strong fourth-quarter earnings today, beating Wall Street estimates thanks to solid growth in several key areas such as the Internet of Things and client computing.

Intel brought in over $16.4 billion in revenues, up by 10 percent year-over-year and beating Wall Street’s estimate of $15.75 billion. The Santa Clara, California-based company’s annual revenue hit a record $59.4 billion, an increase of 7 percent over the previous year.

“The fourth quarter was a terrific finish to a record-setting and transformative year for Intel,” Chief Executive Brian Krzanich (pictured) said in a statement. “In 2016, we took important steps to accelerate our strategy and refocus our resources while also launching exciting new products, successfully integrating Altera, and investing in growth opportunities.”

Despite the growth in 2016, Intel expects revenues to be flat for 2017. That may be one reason investors were only moderately pleased. After falling less than 1 percent in regular trading, to $37.56 a share, the stock rose a small fraction in after-hours trading. Update: On Friday, shares were rising 1.6 percent in late-morning trading.

Cloud rises, enterprise falls

Several of Intel’s business segments saw growth, particularly the Internet of Things group, which grew by 15 percent from a year ago, to $2.6 billion in revenues for the year. The client computing group grew by a more modest 2 percent, with total revenues for 2016 of $32.9 billion.

Intel’s data center group also grew in 2016, earning $17.2 billion in revenues, up 8 percent over the previous year. While the overall segment grew, however, Intel noted that the enterprise portion dropped by 3 percent.

According to Krzanich, enterprise now represents less than half the company’s data center segment as more and more companies transition into the public cloud. During the Q&A portion of today’s earnings call, Krzanich said that the enterprise segment will probably not improve anytime soon.

“Our view is that enterprise will continue to decline,” Krzanich said. “A lot of that is those workloads moving to the cloud.” He did say that the segment will eventually stabilize, however, because there are “still workflows that will want to be in a private cloud.”

Krzanich added that Intel expects the cloud segment to grow at a much faster rate in the future as connected devices, including autonomous vehicles, become more widely available.

Memory a growth engine

Krzanich highlighted Intel’s 3D Xpoint memory technology as one of the company’s key investment areas, and he believes that it will be one of Intel’s main growth engines over the next few years. 3D Xpoint is a non-volatile memory technology that Intel claims can offer 1,000 times the performance of regular NAND flash memory.

According to Krzanich, 3D Xpoint will prove to be especially powerful for high-volume data applications such as artificial intelligence and autonomous vehicles, saying the technology “will not only transform the architecture of those systems, but also the performance of those systems.”

In addition to 3D Xpoint, Krzanich also noted that networking and storage, in which Intel currently has a low market share, will be other major growth opportunities for the company, especially as the volume of data in the world continues to rise.

‘Pretty good quarter’

Intel’s performance impressed investors as the company showed it could beat expectations even in markets that are on the decline.

“Intel had a pretty good quarter,” Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told SiliconANGLE. “Client computing revenue has not only flattened but actually saw some slight increases even though units declined. I attribute this to customers embracing more premium PCs driven by commercial upgrades, gaming and VR.”

Moorhead was also impressed by Intel’s data center performance, even if it is not seeing quite the stellar growth it used to. “Datacenter got back on track and while it wasn’t double-digit growth, many customers are waiting for the latest ‘Purley’ server chips to their big upgrades, so I think there’s pent-up demand.”

Photo by Robert Hof

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