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Intel Tops Earnings Forecasts But Shares Turn Lower

Intel topped forecasts for both earnings and revenue, which the company attributed to strong corporate, mobile and emerging market demand. But the stock fell as the company slightly lowered its outlook for the PC market.

Intel's headquarters in Santa Clara, California.
Paul Sakuma
Intel's headquarters in Santa Clara, California.

Intel CEO Paul Otellini said the company's PC-unit forecast was "down a bit." The company expects PC unit growth around 8 to 10 percent, down from last quarter, when the company said it expected percent growth in the low double-digits. Analysts and investors have been skeptical about PC market growth amid competition from lower-cost PCs from China that aren't using Intel chips.

The world's largest chip maker reported its earnings excluding items rose to 54 cents a share in the second quarter from 51 cents a share in the year-earlier period.

"These are real strong numbers to me. The wall of worry that the market had been building about Intel was misplaced," said Alex Gauna, an analyst at JMP Securities. "Their growth in earnings verifies everything Intel's been saying about their strategy and the importance of the cloud computing upgrade cycle."

Intel shares slipped in regular trading Wednesday. They initially rose after-hours but then retreated. Click here for the latest after-hours quote.

Revenue increased 21 percent to a record $13.03 billion from $10.77 billion a year ago. Intel said it was its fifth straight record revenue and that it posted double-digit percent gains across all business segments.

Analysts had expected the company to report earnings of 51 cents as share on revenue of $12.83 billion, according to Thomson Reuters.

Net income rose 10 percent to $3.2 billion, or 59 cents a share.

The company said its gross margin was down 5.5 percentage points to 62 percent.

Intel said it expects revenue of $14.1 billion in the third quarter — "plus or minus $500 million." If Intel hits that mark, it would be a 27 percent increase in revenue from the third quarter of 2010 and above analysts' expectations of $13.46 billion. The company also expects full-year revenue growth in the mid-20 percent range.

The company also said it expects a gross margin of 64 percent in the third quarter, "plus or minus a couple percentage points."