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Intel serves up a revenue beat as data centre business grows

A man looks at a smartphone at the Intel booth during the 2015 Computex exhibition at the TWTC Nangang exhibition hall in Taipei, Taiwan, June 2, 2015.

Reuters/Pichi Chuang

Intel Corp (INTC.O) 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.

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 Corp (ALTR.O) 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.

Microsoft Corp’s (MSFT.O) decision to withdraw support for the Windows XP operating platform last year boosted demand from businesses forced to upgrade their employees’ PCs and laptops.

But with the cycle of upgrades ending and the dollar’s continued strength leading to price increases overseas due to the devaluation of local currencies, PC demand has slumped again.

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

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.

Intel’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 weighted average shares outstanding 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 an 2.9 percent fall in the Philadelphia Semiconductor Index .SOX.

(Editing by Simon Jennings)

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