According to Bernstein Research estimates, microprocessor gargantuan Intel Corporation's (NASDAQ:INTC) strengthening commitment in a particular aspect—its data-center business—has resulted in a highly lucrative point. The research firm had reported that Intel spent “at least an order of magnitude more on [its data center group, or DCG] than any competitors have available.”
Intel’s investment wasn’t always this high; over the course of the last several years, the level of bets on the DCG was already more than usual, and then gradually became bigger.
Do we expect a 2017 doubling down on the DCG? The timeline below seems to say ‘yes’ to that question.
The Beginning: 2011
In year 2011, operating expenses slightly outperformed revenue; the tech corporation announced that revenue coming from the DCG added 17% compared to the previous year. On the other hand, operating profit had only grown by $712 million, or about 16.2%.
Intel credited that operating profit growth to considerably higher revenue, but noted that this was somewhat counterbalanced by greater operating expenses compared to 2010.
Burst in 2012
After spending outpaced revenue growth in the prior year, Intel went under acceleration in 2012: DCG revenue saw comparatively weak progress at just 6%.
Meanwhile, operating expenses significantly beat revenue that year. The company reported that DCG's operating income came down by $27 million compared to 2011. Furthermore, Intel stated that the additional $360 million in gross profit that it witnessed due to revenue growth was more than compensation by $387 million of higher operating expenses.
Intel Leaps in 2014
In 2014, Intel's DCG experienced a lucrative year after acquiring revenue growth of 18% from 2013, which was already 7% higher from the prior year levels. Intel also announced that operating income in DCG had a mighty jump of 31%, thanks to $2.4 billion of higher gross margin partly offset by $689 million of higher operating costs.
The great achievement that DCG relished that year let it cranked up those investments while at the same time, brought excellent operating profit growth.
2015: A Bigger Success
Even after growing its DCG operating expenses by $689 million in 2014, Intel wasn't quite done turning up the heat in that segment. In 2015, Intel reported a $725 million increase in operating expenses, which the company said was "driven by higher shared product development costs."
Investment Growth in 2016 Continues
While the microprocessor giant has not posted its financial results this year, its first three quarters for 2016 is already hinting that Intel is looking at another period of significant operating expense growth— related to DCG of course.
During the first quarter, Intel stated that operating expenses surged by $125 million year over year. In the second quarter, Intel didn't underpin a year-over-year change in operating expenses as a reason of its operating profit in that segment. However, in the third, Intel reported a full $285 million year-over-year gain in its lucrative, highly-invested DCG operating expenses. It’s not so far-fetched for the fourth quarter to see another boost from the DCG.
Intel evidently isn't done with increasing its already solid investments in DCG. Intel's new chief financial officer, Robert Swan, is expected to go over the corporation's investment plans in that section for 2017 at Intel’s investor meeting scheduled in February.
As of writing, the Intel stock is BMW (DE:BMWG) and Mobileye (NYSE:MBLY).