Intel: Fiscal 2Q16 Financial Results

(in $ million)	2Q15	2Q16	6 mo. 15	6 mo. 16
Revenue	13,195	13,533	25,976	27,235
*Growth*		3%		5%
Net income (loss)	2,706	1,330	4,698	3,376

Intel Corporation reported second-quarter GAAP revenue of $13.5 billion, operating income of $1.3 billion, net income of $1.3 billion and EPS of 27 cents.

It reported non-GAAP operating income of $3.2 billion, net income of $2.9 billion and EPS of 59 cents. The company generated approximately $3.8 billion in cash from operations, paid dividends of $1.2 billion, and used $804 million to repurchase 26 million shares of stock.

“Second-quarter revenue matched our outlook and profitability was better than we expected,” said Brian Krzanich, CEO. “In addition, our restructuring initiative to accelerate Intel’s transformation is solidly on-track. We’re gaining momentum heading into the second half. While we remain cautious on the PC market, we’re forecasting growth in 2016 built on strength in data center, the Internet of Things and programmable solutions.”

Q2 Key Business Unit Trends*

Client Computing Group revenue of $7.3 billion, down 3% sequentially and down 3% year-over-year
Data Center Group revenue of $4.0 billion, up 1% sequentially and up 5% year-over-year
Internet of Things Group revenue of $572 million, down 12% sequentially and up 2% year-over-year
Non-Volatile Memory Solutions Group revenue of $554 million, down 1% sequentially and down 20% year-over-year
Intel Security Group revenue of $537 million, flat sequentially and up 10% year-over-year
Programmable Solutions Group revenue of $465 million, up 30% sequentially. Note the comparable period did not include $99 million of revenue as a result of acquisition-related adjustments.

* The first quarter of 2016 had 14 weeks of business versus the typical 13 weeks, as the company realigned its fiscal year with the calendar year.

Comments

Revenue of non-volatile memory solution group
(in $ million)

Period

2FQ15

2FQ16

6 mo. 15

6 mo.16

Revenue

696

554

1,288

1,111

Y/Y growth

-20%

-14%

Revenue of Intel's non-volatile memory solution group is decreasing each quarter since one year.

For the most recent one, at $554 million, it is down 20% Y/Y and 1% Q/Q, and 14% for the last six months.

CEO Brian Krzanich commented:" Our memory business (...) fell short of our expectations as a result of a more competitive pricing environment. While we acknowledge the cyclical and competitive nature of this business, we remain confident in our long-term growth prospects as a result of the new technologies we are bringing to this market."

Fab 68 in Dalian, China, started its initial 3D NAND wafers late in the second quarter, ahead of schedule. The company remains on track to ship 3D XPoint SSDs, branded Optane, by the end of the year.

But Intel is going to lose OEM HGST, following the acquisition of NAND manufacturer (with Toshiba) SanDisk by Western Digital.

In storage connectivity products competing with Mellanox IB, high-performance computing fabric Omni-Path, launched earlier this year, has already achieved 30% market segment share of the 100Gb fabric market, said the company, adding that, In June's Top 500 Supercomputing list, Omni-Path was deployed in half of the new 100Gb systems.

This quarter, Intel also shipped its first silicon photonics products for revenue, the fully integrated solution. It expects Data Center Group's adjacent product lines, including Omni-Path, silicon photonics, and Ethernet, to collectively grow more than 20% for the full year, and this quarter make up 12% of DCG's revenue.