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Intel Is Well-Positioned for Growth as Long as AMD Doesn't Get In the Way

Much like Microsoft Corp. (MSFT) , Intel Corp. (INTC) has an interesting blueprint for delivering moderate sales and earnings growth that includes investing big in major data center and cloud opportunities while keeping a PC cash cow roughly steady. Unlike Microsoft, Intel's blueprint could be upended by the resurgence of an old rival -- AMD Inc. (AMD) -- that's in the midst of rolling out a string of intriguing products.

The chip giant's solid Q2 results suggest AMD is only having a limited impact on its performance for now. But as some recently-launched AMD products ramp and additional ones hit the market, there's some risk that the story will change.

Intel reported Q2 revenue of $14.76 billion (up 9% annually) and adjusted EPS of $0.72 (up 22%), beating consensus analyst estimates of $14.4 billion and $0.68. It also guided for Q3 revenue of $15.2 billion to $16.2 billion and EPS of $0.75 to $0.85, mostly above a consensus of $15.2 billion and $0.74. And for full-year revenue of $60.8 billion to $61.8 billion and EPS of $2.85 to $3.15, almost entirely above a consensus of $60.2 billion and $2.86 even after accounting for the fact that Intel expects its pending acquisition of Mobileye NV (MBLY) to add $200 million to 2017 revenue and $0.02 to EPS.

Shares are up a modest 0.5% to $35.15 as of the time of this article. Possibly keeping a lid on gains: Intel's sales guidance still doesn't imply much growth. At its $15.7 billion midpoint, Q3 sales guidance actually implies a slight decline relative to year-ago revenue of $15.78 billion. And full-year sales guidance only implies 3% growth at its $61.3 billion midpoint, even though revenue rose 8.5% during the first half of 2017.

This outlook has much to do with the fact Intel is maintaining a cautious view for its second-half PC CPU sales. On the earnings call, management said that while 2017 PC sales are trending a little better than previously expected, it still expects the PC total addressable market (TAM) to register a decline close to a prior forecast for a mid-single digit drop.

This downbeat forecast comes in spite of the fact Intel's Client Computing Group (CCG), responsible for PC and to a lesser extent mobile processor sales, was the main driver behind the Q2 beat. CCG revenue rose 12% annually to $8.2 billion, topping a $7.8 billion consensus. It helped that the segment's "Other/Modem" revenue rose 45% to $579 million thanks to iPhone 7 modem sales to...