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Intel Earnings Soar As Chip Giant Sees PC Revival Ongoing

Intel late Tuesday beat recently raised Q2 earnings estimates and gave bullish guidance, thanks to strong business PC demand. The chip giant also said that it will buy back $20 billion in stock.

Shares jumped 4% in after-hours trading. During the regular session, Intel (INTC) rose 0.7% to 31.71 after hitting a 10-year high of 31.80 intraday.

Intel earned 55 cents a share in its June quarter, up 41% vs. a year earlier. Sales rose 8% to $13.83 billion. Both were the best gains in years.

Analysts polled by Thomson Reuters expected EPS of 52 cents on sales of $13.69 billion after Intel raised revenue guidance on June 12.

Q2 gross profit margin was 64.5%, up from 58.3% in Q2 2013.

PC client group revenue rose 6% to $8.7 billion. Give credit to an ongoing business refresh cycle and upgrades from the Windows XP operating system, which Microsoft (MSFT) no longer supports.

Meanwhile, data-center revenue rose 19% to $3.5 billion.

"The commercial PC market is back, at least for a small period of time, and the data-center machine just keeps chugging along," said Patrick Moorhead, founder of Moor Insights & Strategy. Intel could also benefit from a consumer PC upgrade cycle next year, he said.

Intel CEO Brian Krzanich said that Intel expects the PC refresh cycle to last through 2014.

For the current quarter, Intel expects revenue of $14.4 billion — plus or minus $500 million — vs. Wall Street's target of $14.03 billion. It forecast a Q3 gross margin of 66%. Intel didn't provide an EPS target, but analysts had been expecting a 3% drop to 56 cents.

"Our second-quarter results showed the strength of our strategy to extend the reach of Intel technology from the data center to PCs to the Internet of Things," Krzanich said in a statement.

He added that Intel is "on track to meet our 40 million unit tablet goal.

Krzanich also gave an update on Intel's upcoming processor: "We hit an important qualification milestone for our upcoming 14-nanometer Broadwell product and expect the first systems to be on shelves during the holidays.

Intel now expects 2014 revenue to grow about 5%. In its June 12 update, Intel said that it expected "some revenue growth" for 2014, up from its April forecast for flat sales for the year. Intel sales were flat in 2012 and 2013.

In Q2, Internet of Things sales rose 24% year over year to $539 million. Software and services revenue grew 3% to $548 million.

However, mobile and communications chip sales fell 83% to $51 million as the segment's operating loss widened to $1.1 billion. Intel hasn't been able to make big inroads vs. ARM Holdings (ARMH) designs in the mobile market.

Intel upped its share repurchase program by $20 billion and said that it plans to buy back about $4 billion in Q3. In the second quarter, it spent $2.1 billion to repurchase 74 million shares.