Intel's Good News Is Transient

Benefiting from a replenishment of PC supply chain inventory,

Intel also expects gross margins to be up to 62%, 200 basis points higher than previously projected due to higher PC unit volume. Additionally, operating expenses are expected to be about $100 million higher, which we believe is likely on the research and development side to support of future server products. Based on this revised guidance, we now believe full-year revenue will be up 5.5%, up from our prior projection of 4%. While positive news from the embattled PC space does provide a solid short-term boost to the company’s financials, we continue to believe the most favorable opportunity for the firm remains in the data center. In particular, the persistent growth in data creation, storage, and manipulation will require more servers, with effectively all run on Intel’s CPUs. Furthermore, we still expect PC units to decline in the low single digits annually through 2020, meaning top-line growth will be driven by non-PC segments.

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