Today Intel released their financial results for the third quarter of their 2014 fiscal year, which ended September 27, 2014. Q3 was a record quarter for Intel, with the highest revenue in the company’s history. Their major markets of the PC Client Group was up 9% year-over-year and the Data Center Group was up 16% year-over-year.

Earnings per share was up 14% compared to Q3 2013 at $0.66, beating analysts’ expectations of $0.65. Year-over-year, revenue was up 8% at $14.6 billion, Gross Margin was up 2.6% at 65.0%, Operating Income was up 30% at $4.5 billion, and net income was up 12% at $3.3 billion.

The PC Client Group, which includes all business related to desktops, notebooks, two-in-one systems, wired and wireless Ethernet (for the PC), home gateway, and set-top-box components, continues to be the largest division for Intel with $9.190 billion in revenue this quarter. For the first three quarters, the PC Client group has contributed $25.789 billion in revenue, up $1.1 billion over the same period a year ago. This group had an operating income for Q3 2014 of $4.120 billion, up from $3.243 billion last year. Q2 seemed to indicate that the PC market has bounced back, and these revenues and income from the PC division for Q3 indicate that the trend will continue. The volume of sales for the quarter were up 7% over last quarter, and up 15% year-over-year. At the same time, the Average Selling Price (ASP) was down 2% from last quarter and down 5% year-over-year. Notebook volumes were up 21% year-over-year with the ASP down 10%, and desktop volumes were up 6% with the ASP down 2%. Intel is forecasting Q4 revenue at $14.7 billion, plus or minus $500 million, so their expectations are that the PC industry will continue its rebound. For Q3, Intel continued to sell the 22 nm range of processors, but has started production of 14 nm Broadwell parts, with a modest increase in inventory which they will likely utilize to keep up with demand for the new parts. Clearly the 14 nm node was a challenge, with the 22 nm node now being the primary process for the last ten quarters, with the average length of time between nodes being 8.5 quarters, starting with the 130 nm process. Q4 looks to be exciting with a whole new type of device able to be created from the Broadwell processors. We should start to see actual devices for sale within the next couple of weeks.

The Data Center Group, which is platforms for server, workstation, networking, and storage computing segments, was also up for Q3, with revenue up to $3.7 billion from $3.178 billion a year ago. Operating Income rose $395 million over Q3 last year to $1.915 billion. Unit volumes were up 6% year-over-year and sequentially, and the ASP was down 1% sequentially and up 9% over Q3 2013.

The Internet of Things group, which is a relatively new division focused on embedded platforms for retail, automotive, home, and transportation, had revenues for the quarter of $530 million, up 12% year-over-year. Revenues were only up $1 million over last year, with $153 million in revenue for this quarter.

The Mobile and Communications Group, which is the division responsible for platforms for tablet and smartphones, as well as mobile communications with baseband processors, RF transceivers, GPS, Wi-Fi, Bluetooth, and power management chips continued its slide for Q3. Revenues were down around 100% year-over-year, at a meager $1 million. This division is also responsible for the majority of Intel’s losses, with a Q3 operating loss of $1.043 billion. For the nine months ended September 27th, this unit has lost $3.096 billion. Intel is pushing hard to drive adoption of its mobile processors, and they seem to be OK with losing money on them in the short term to gain the foothold for the future. We have seen a slew of low priced tablets packing Intel Bay Trail processors, including the HP Stream tablets and just recently a $65 tablet from Emdoor out of Hong Kong. It seems hard to believe that you can buy a Windows tablet for less than the cost to fill your tank with gas, but with both Intel and Microsoft dropping fees, you have to wonder how low things will go before they stop. Luckily for Intel, their strong performances in other segments allows them to be a loss leader in this category, and they must see the long term gain here by not just allowing ARM SoCs to rule the space.

The final division for Intel is the Software and Services segment, which includes McAfee which they acquired a few years ago, and the Software and Services Group which delivers products and services that promote Intel architecture as a platform for development. This unit had a slight bump in revenues, up $13 million over last quarter to $558 million, and operating income was up 97% at $29 million.

Intel Q3 2014 Financial Results (GAAP)
  Q3'2014 Q2'2014 Q3'2013
Revenue $14.554B $13.831B $13.483B
Operating Income $4.918B $3.844B $4.910B
Net Income $3.317B $2.796B $2.950B
Gross Margin 65.0% 64.5% 58.3%
PC Group Revenue $9.2B +6% +9%
Data Center Group Revenue $3.7B +5% +16%
Internet of Things Revenue $530M -2% +14%
Mobile Group Revenue $1M -98% -99.7%
Software and Services Revenue $558M +2% +2%
All Other Revenue $558M +2% +2%

Q4 expectations are for revenue to increase slightly to $14.7 billion, plus or minus $500 million and Gross Margin will be 64%, plus or minus a couple of points. With Broadwell soon to be shipping to consumers, Intel is clearly expecting another record quarter. It is great to see the PC market recovering, and one has to wonder to what level it will continue. The expectations of the tablet replacing the PC seem to have subsided for the moment, due to a slump in overall tablet sales. With Broadwell now shipping, we will of course anxiously await Skylake, which will be the new Core architecture available on 14 nm, and the Cherry Trail Atom chips which will also use the new node.

This was a pretty bullish quarter for Intel, which is generally a good indicator of the overall PC market. They still have their work cut out for them in the mobile segment, but with the other divisions pulling in great revenue and margins, they seem to be content to play the long game on what is certainly a very important segment for the future.

Source: Intel Investor Relations

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  • Drumsticks - Tuesday, October 14, 2014 - link

    It almost surprises me how much Intel is losing in Mobile. How much are they losing per atom chip sold? Atom is certainly a decent chip, although its getting a bit old now, so I wonder how much market share they're gaining. That would really help put this in perspective. If they've gained a decent share of the market, it's certainly not too bad.
  • yannigr2 - Wednesday, October 15, 2014 - link

    It's a total crap chip that they are giving away for free. I think we now know for fact why AMD's Mullins haven't been in about anything by now and everyone is using crap Z3735 chips.
  • Speedfriend - Wednesday, October 15, 2014 - link

    "It's a total crap chip that they are giving away for free."
    Right, total crap chip, that is why the Atom 3775 scores 2863 in geekbench while the new Apple A8 scores 2881.

    Have you even used something with one of the Atom in, like a Asus T100. It feels as fat as a core laptop.

    What is total crap is what you have written, that all...
  • yannigr2 - Wednesday, October 15, 2014 - link

    "Have you even used something with one of the Atom in, like a Asus T100. It feels as fat as a core laptop.

    What is total crap is what you have written, that all..."

    It is obvious that you have no idea what I am talking about. You better start reading a few more articles and google a few unknown names to you, like AMD and Mullins, before posting nonsense. Apple and AMD may have a common first letter in their names but, and this is going to shock you, they are two totally different companies.

    So, first you are comparing a quad core x86 chip that has a turbo speed at 1.8 with a dual core ARM chip that has a 1.4GHz frequency. This is a huge facepalm.

    Second, who cares about A8? Who mentioned A8?

    Have a look at this

    you might learn something, but I don't believe so. From your comment I am pretty sure you are 12 years old, mentally at least, or you are just trolling.
  • Speedfriend - Wednesday, October 15, 2014 - link

    Did you even look at what you posted in support of your agrument. In some of the test, the top of the range A10 6700T manages to beat the middle of the range 3740 by around 20%, but then loses to the 3770 when it is included in the benchmarks. So while I agree the AMD chip is great for graphicxs it is certainly no better in CPU tests.

    The reason I assess your 'crap' comment against the A8 is because that is the benchmark for tablet chips. Nobody cares about some AMD tablet chip that will never make it in the market.

    And thanks for expalining that about dual core and quad core to me. I have just been out there buying octacore smartphone because I was sure they had to be faster than dual core ones. I mean it is like having 8 engines in a car instead of just 2.

    Crap is what descibes almost everything that AMD puts out at the moment, cheap but still crap...
  • yannigr2 - Wednesday, October 15, 2014 - link

    Did you? I don't think so. In every tablet out there you will find a z3735, a little slower than the z3740 in T100 that loses in ALL benchmarks except PCMark where other parameters could be the reason for this(storage performance).

    Fortunately for the Atom, there where no GPU benchmarks in that article. To be fair the site would had to add an age verification page before giving access to those results. That's how bad those results would have been for Intel.

    z3770 is not only the top, it is also the most expensive. And I don't think Intel is giving it as a gift. The problem here is that Intel gives away it's lowest SoCs for free. If you had the mentality to understand how bad monopolists are, I would had spent a little more time to explain to you. Just to help you a little, this is the reason why you will never see an AMD chip in a tablet. Not an x86 anyway.

    At least you saw that mentioning A8 was stupid. It would have been better of course if you had the guts to accept your mistake and not just try to find excuses for it talking about your new octa core smartphone(congrats).

    PS. More cores is not always better.

    PS 2. LEARN TO READ, then you may accuse others about crap comments.

    I stop here. Nothing else to say. Lost enough time with you.
  • RMSe17 - Wednesday, October 15, 2014 - link

  • djscrew - Wednesday, October 15, 2014 - link

    Try ranting less. You compare Ghz like it's the single defining factor in a mobile chip. Try chilling the fck out and maybe someone might be able to understand the point you're trying to make.
  • ppi - Thursday, October 16, 2014 - link

    With revenue just only $1M, they must be giving ALL of them for free.
  • garbagedisposal - Wednesday, October 15, 2014 - link

    Yannigr is right.
    I have a T100 in front of me and I can tell you it is not *nearly* as powerful as a laptop.
    The z3775 atom is equivalent to a 1ghz ulv C2D at best with half the grunt per core.
    Don't try to sell it as something equivalent to the A8 (or A7) because it absolutely is not even in the same league in terms of responsiveness.

    Also, only a few devices even use the z3775. It's mostly z373x, 374x models in the market.

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