Intel shares fell more than 8 percent in early morning trading on Friday, even though the company's earnings results for the second quarter beat out estimates with record revenue of $17 billion, up 15 percent year-over-year. That enabled Intel to nearly double its profit to $5 billion, versus $2.8 billion the same quarter a year ago. Nevertheless, investors seem more concerned about Intel giving up market share in the data center to rival AMD than posting record earnings.
While still a dominant force with its Xeon line, Intel is now seeing increased competition from AMD's Zen-based Epyc processors. Whether investors are overreacting is up for debate—Intel's Data Center Group (DCG) increased its revenue by 27 percent year-over-year to $5.5 billion, coming up just short of what analysts were expecting.
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Intel does not seem phased by the situation, at least not outwardly.
"After five decades in tech, Intel is poised to deliver our third record year in a row. We are uniquely positioned to capitalize on the need to process, store and move data, which has never been more pervasive or more valuable," said Bob Swan, Intel CFO and Interim CEO. "Intel is now competing for a $260 billion market opportunity, and our second quarter results show that we’re winning. As a result of the continued strength we are seeing across the business, we are raising our full year revenue and earnings outlook."
Intel has been "winning" for a long time, though the fact that an interim CEO is making the statement could be more cause for concern among investors. Former CEO Brian Krzanich abruptly resigned last month after an investigation revealed he had an "past consensual relationship" with another Intel employee that broke the company's non-fraternization policy.
The company has also come under scrutiny for taking so long to roll out its 10-nanometer product stack. Intel did finally release a 10nm processor in select OEM laptops, but the wait for Cannon Lake to arrive in volume has been ongoing.
Despite the challenges, its is remarkable that Intel is posting record numbers, even if that fact is lost on investors at the moment. Intel achieved revenue growth in every business segment last quarter, which notably included a 6 percent bump in its PC-centric business driven by its gaming and commercial products.
Looking ahead, Intel is forecasting an 11 percent jump in revenue to $69.5 billion for the full year, with its data center division rising 20 percent year-over-year.