Intel's data centre business struggles as demand drops in Q3

Overall revenues are down at the chipmaker as COVID-19 starts to hit, but PC shipments continue to thrive

The Intel logo displayed on a smartphone being held

Intel shares fell 10% in extended trading on Thursday after the company reported third-quarter earnings with lower-than-expected returns from its data centre business. 

The company's Data Centre Group brought in $5.91 billion in revenue, down 7% year-on-year, and around $1 billion less than analyst's estimates, according to CNBC

Overall revenues were also down 4% on an annualised basis, according to a statement from the chipmaker. In the second quarter of 2020, revenue had increased by 20%.  

The poor performance of its Data Center Group was attributed to revenue drops from enterprises and governments, slumping 47% due to the coronavirus pandemic.; that growth was above 30% in both the previous quarters of the year. The operating margin for the firm's Data Centre Group reached 32%, which is down from 49% in 2019. 

The company's cloud revenues showed some positivity, with steady growth of 15% in the quarter. However, the average selling price across the division was 15% lower than in the year-ago quarter.

The company's largest business also fared better with its Client Computing group - the area that sells PC chips - up 1% year-on-year with $9.85 billion revenue. 

PC shipments have been steady during the pandemic. Gartner estimated that shipments grew 3.6% in the third quarter with people needing more hardware for remote work and study. 

This was backed up by analysis from Canalys, which reported the PC market growing faster in Q3 than it had done in a decade. After a weak Q1, the sector recovered in the following months with a massive 12.7% increase in PC shipments compared to the same time in 2019. It was the highest market growth in ten years and equated to 79.2 million units.

While Intel shares dropped, rival chipmaker AMD's rose as much as 2% in extended trading after the announcement.

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