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Intel’s Operating Profits Drop by 39% YoY on Account of Shrinking Server Profit Margins

There was a lot of negativity surrounding Intel’s Q3 earnings report. Roadmap delays, a bleak outlook, and limited gains led to yet another disappointing quarter for stakeholders. Amid all this, there were some aspects of Intel’s business that were overlooked.

The company’s overall operating income was down by a rather meaty 39% YoY. As the prices of the desktop and mobile parts haven’t changed by much, experts believe that the reason behind the massive drop in operating income is the reduction in profit margins in the server segment.

Unlike the consumer market, the server platform is a bit different. Intel sells its chips directly to its partners at special, undisclosed prices which are often lower than the recommended pricing. The recent influx of AMD’s 64 core Epyc Rome processors and the shadow of the upcoming Milan parts has undoubtedly put a lot of pressure on Intel’s server segment. In order to retain clients, the company is selling its server chips at minimal profit margins, explaining the drop in the OI.

Looking at the desktop and notebook markets, there’s not a whole lot to see here. The desktop market grew by roughly 19% but the ASP (average selling price) was down by 2%. This is likely due to the increased competition from AMD’s Ryzen 4000 notebooks that offer a much better price-performance ratio compared to Intel’s present products.

In the desktop market, sales were down by 12%, no surprise considering that the Comet Lake-S lineup is yet another Skylake refresh on the 14nm node. ASPs were, however, just slightly higher as the 10th Gen parts are more expensive than the older 9th Gen offerings.

We’ll get a better idea of how the market is reacting to Intel’s delays in the coming week as AMD discloses its Q3 earnings report.

Areej

Computer Engineering dropout (3 years), writer, journalist, and amateur poet. I started Techquila while in college to address my hardware passion. Although largely successful, it suffered from many internal weaknesses. Left and now working on Hardware Times, a site purely dedicated to.Processor architectures and in-depth benchmarks. That's what we do here at Hardware Times!
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