Intel better than expected as PC revenues drop 13.5 percent

Growth in data centres and Internet-of-Things business help company cover weak demand in PCs using Intel chips

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

Intel reported better-than-expected quarterly results on Wednesday as growth in its data centres and Internet-of-Things businesses helped offset weak demand for personal computers that use the company's chips.

Shares of the world's largest chipmaker, which also cut its full-year capital expenditure forecast for the second time, rose as much as 9.2 percent after market before paring some of their gains.

The company has been expanding its line-up of higher-margin chips used in data centres to counter slowing demand from the PC industry and agreed to buy Altera for $16.7 billion in April as part of these efforts.

Revenue from the data centre business, Intel's second-largest, grew 9.7 percent to $3.85 billion in the second quarter from a year earlier, helped by continued adoption of cloud services and demand for data analytics.

"We continue to forecast robust growth rates of the data centre group, Internet of Things group and NAND businesses, which we expect to mostly offset the PC decline," Chief Financial Officer Stacy Smith said on a post-earnings call.

Revenue from the PC business, Intel's largest, fell 13.5 percent to $7.54 billion in the quarter ended June 27.

"Our expectations are that the PC market is going to be weaker than previously expected," Smith said.

Research firm Gartner forecast global PC shipments to fall 4.5 percent to 300 million units in 2015, with no respite until at least 2016.

Intel forecast current-quarter revenue of $14.3 billion, plus or minus $500 million. Analysts on average were expecting revenue of $14.08 billion, according to Thomson Reuters I/B/E/S.

The company also cut its 2015 capex forecast to $7.7 billion, plus or minus $500 million. It had cut its full-year capex forecast to $8.7 billion from $10 billion in April.

The company's net income fell to $2.71 billion from $2.80 billion a year earlier. Earnings per share, however, were flat at 55 cents as the number of outstanding shares fell.

Analysts had expected a profit of 50 cents per share.

Net revenue fell 4.6 percent to $13.19 billion, but edged past the average analyst estimate of $13.04 billion.

Up to Wednesday's close, Intel's stock had plunged about 18 percent this year, compared with a 2.9 percent fall in the Philadelphia Semiconductor Index.