For the quarter gone by, Intel reported revenue of $16.1 billion compared to expectations of $14.42 billion. Earnings Per Share (EPS) for the quarter stood at $0.42, double than the estimate of $0.21.
Intel now expects revenue for the ongoing third quarter to be between $15.8 billion to $16.8 billion, well above analyst expectations of $15.1 billion. EPS is projected to be $0.38, also above analyst estimates of $0.27.
“AI is driving unprecedented demand for compute,” CEO Lip-Bu Tan said in the statement. “As we continue to execute, Intel is well-positioned to capture sustainable growth across our CPU franchise.”
Intel has also begun to sign long-term agreements with customers for its server CPUs. CFO David Zinsner in the company’s earnings call, stated that Intel has signed 10 long-term agreements as they are supply constrained, with data center customers demanding more than what the company can currently produce.
The client computing business, which makes chips for PCs saw 13% growth during the quarter and continues to remain the biggest revenue contributor, but is facing a fast catch-up from the data center division, where revenue grew 59% to $6.3 billion. It warned that PC sales may remain flat during the quarter due to the memory chip shortage.
Intel also said that they are targeting a “meaningful increase” in capital expenditure, although it did not highlight a number. Most of the spending will be for factory tooling.
Another highlight for the quarter was the recovery in Intel’s gross margins, which stood at 42%, way higher than the 2.5% it reported during the year ago quarter. Benefits of scale with more revenue and higher prices of chips were the factors behind this sharp recovery.
Intel shares gained as much as 13% after the results announcement in extended trading, only to give up all of it and turn negative. The stock then gained around 4% before extended trading closed.
Shares of Intel are already up nearly 200% this year after last year’s 84% advance after the US government took a 10% stake in the company as part of the efforts to support localized chip manufacturing. However, the stock has not been isolated from the recent sell-off in chip stocks, declining 28% so far this month.
