Intel Gives Bullish Sales, Profit Forecast on Data Center Demand

Ian King (Bloomberg) -- Intel Corp. gave an upbeat forecast for fourth-quarter sales and profit, indicating demand for semiconductors that power cloud-computing data centers is improving even as the trade dispute between the U.S. and China drags on.

Revenue in the current period will be about $19.2 billion, and net income will be about $1.28 a share, Intel said Thursday in a statement. That compares with average analysts’ estimates of $18.9 billion and $1.16 a share. Shares climbed about 8% in late trading on the bullish outlook.

While Intel’s peers are reporting increasing difficulties amid the China-U.S. trade standoff, the company is benefiting from booming demand for the lucrative server chips that run giant data centers. Revenue is also being buoyed by a steadier memory-chip market and continued strong growth in the automotive unit.

“The Data Center market appears to be showing some signs of life,” BMO Capital Markets analyst Ambrish Srivastava wrote in a note, “as it starts to recover some from the pause in buying we saw over the last several quarters.”

Intel shares jumped as high as $56.59 in extended trading following the report. The stock had earlier closed at $52.23 in New York trading. Shares have gained 11% this year.

Sales in the third quarter were little changed at $19.2 billion, the Santa Clara, California-based company said. Analysts on average had predicted $18 billion, according to data compiled by Bloomberg. Net income was $6 billion, or $1.35 a share, compared with estimates for $1.17 a share. Gross margin, or the percentage of sales remaining after deducting the cost of production, was 58.9% in the quarter. That measure of profitability, a gauge of efficiency for a manufacturing company, has sunk below 60% on an annual basis only once this decade.

Related:Cloud Giants’ 2019 Data Center Investment a Mixed Bag for Providers