Intel handily beat earnings expectations for Q1 2018 on the strength of its data center business. The company is undergoing a transformation that parallels the IT industry at large; its chip business focus is shifting from end user PCs to the data centers powering evolving end user needs as well as artificial intelligence to optimize it all.
The data center business is approaching half of the company’s revenue for the quarter, and was the bright spot in quarterly earnings. Big blue chip tech companies have, for the most part, undergone transformation initiatives to serve next gen needs.
Revenue rose to $16.07 billion, up from $14.8 billion in Q1 2017. Its Q1 was well above Street estimates of $15.07 billion. Intel initially provided a healthy-sized guidance window which it surpassed with ease: $14.5 billion to $15.5 billion.
The strength of Intel’s data center business is indicative of a strengthening data center industry in general – it’s good for all in the industry.
Chief Financial Officer Robert Swan said he expects a deceleration in data center business growth for the second half on an investor conference call. Given the company raised full-year guidance by $2.5B to $67.5B, it should be taken as cautious optimism.
The Internet of Things, Artificial Intelligence and other trends are increasing processing needs, particularly in the data center (as opposed to traditional end user devices). The bar of performance expectations is steadily rising, pushing needs to the Edge. Intel has been capitalizing on the shift, releasing its Edge-targeted Xeon-2100 processor in February.
Edge computing (i.e. a more distributed setup serving end users as close as possible) is driving the next evolution of the data center business. While deployments in core hubs like Ashburn and Silicon Valley used to do the job, increasingly intense needs from jobs like AI, coupled with a decreasing tolerance for latency amidst the rise of Internet of Things, is driving more distributed edge deployments.