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Intel Corp INTC

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Intel Continues to Enjoy Robust PC Demand in Q2, Though Data Center Pricing Pressure Remains

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Intel reported second-quarter results that exceeded its guidance, primarily due to stronger than expected laptop demand. The firm has been experiencing a renaissance in the PC market, as COVID-19 has increased PC density (PCs per household) as more people work and learn from home. CEO Pat Gelsinger expects the PC addressable market to maintain growth beyond 2022, citing an estimated 400 million PCs over 4 years old that could be due for refresh. More importantly, Intel’s data center group, or DCG, continues to face major headwinds. Management cited competition, increased costs associated with the 10-nanometer ramp, and increased R&D spending as key drivers of the DCG operating income decline (down 37% year over year). We suspect the biggest challenge remains renewed competition from AMD that is likely pressuring Intel’s DCG prices. While we remain optimistic on Intel’s IDM 2.0 strategy to get its manufacturing back on track and develop a more substantial foundry offering, we expect the next few quarters to be challenging.

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Company Profile

Business Description

Intel is the world's largest chipmaker. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It was the prime proponent of Moore's law for advances in semiconductor manufacturing, though the firm has recently faced manufacturing delays. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has stagnated. These include areas such as the Internet of Things, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, acquiring Altera, Mobileye, and Habana Labs in order to bolster these efforts in non-PC arenas.

Contact
2200 Mission College Boulevard
Santa Clara, CA, 95054-1549
T +1 408 765-8080
Sector Technology
Industry Semiconductors
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 26, 2021
Stock Type Cyclical
Employees 110,600

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