INTC Intel Corporation

By Ted Greenwald 

Intel Corp. on Thursday said adjusted quarterly profit increased as the company posted revenue growth in many of its units despite growing competition in core markets.

Revenue at the Santa Clara, Calif., company rose 9.6% to $14.8 billion in the quarter ended July 1 from a year earlier, driven partly by strength in its division selling chips for personal computers and industrial-strength servers.

Shares rose 2.9% to $35.98 in after-hours trading as the company said it increased its full-year revenue and earnings per share forecast.

Intel holds 93% of the roughly $31 billion global market for the calculating engines in PCs and approaches 100% share of the $16.5 billion world-wide market for server processors, according to Mercury Research. That leaves it almost no room to grow. Competition, meanwhile, is beginning to emerge in both servers and PCs.

Still, the company said it was growing in areas like artificial intelligence development and autonomous driving. Intel is in the process of buying Israeli car-camera pioneer Mobileye NV for $15.3 billion. That deal is expected to close in the third quarter.

Revenue at Intel's unit responsible for PC chips rose 12% from the year-ago quarter. Personal computer sales have been in a persistent decline as consumer spending shifts to mobile devices, though Intel's rising PC-chip prices have somewhat made up for it. That unit saw a 3% increase in volume and an 8% increase in prices.

Revenue in the division that sells server processors for data centers, a market central to the chip giant's future, rose 8.6%, at the high end of Intel's guidance.

Overall, Intel reported profit of $2.8 billion, compared with $1.3 billion in the same quarter last year. The latest earnings figure translated to 58 cents a share, or 72 cents a share on an adjusted basis, excluding restructuring charges and certain items arising from acquisitions. One year ago, Intel reported adjusted earnings of 59 cents a share.

Analysts surveyed by Thomson Reuters expected adjusted earnings of 68 cents per share on $14.4 billion in revenue.

Earnings in the previous year's quarter were hurt by restructuring and charges.

The company said it now expects $61.3 billion in revenue and adjusted earnings per share of $3. It previously expected $60 billion in revenue and $2.85 in per-share earnings.

Intel's server chips face rising competition from Nvidia Corp.'s graphics processors, which have proven especially efficient in some artificial tasks.

Intel has said it would introduce its own AI-focused Nervana chips later in the year.

Advanced Micro Devices Inc. in June launched a direct assault on Intel's server chips. Its Epyc line is aimed squarely at the lower half of Intel's data-center offerings, which accounted for roughly 80% of its 2016 server-chip sales, according to Bernstein Research. Epyc hit the market too late to be reflected in either chip maker's second-quarter results.

Intel fired back in July with an upgraded line of server chips called the Xeon Scalable Platform intended to one-up AMD's performance.

Challenging Intel's stronghold in PCs, AMD debuted its Ryzen desktop chips in March, giving Intel its first full quarter of serious competition in that market in years, and has said it expects to introduce laptop units later this year.

Intel responded in late May with an upgraded line of PC processors it calls Core X claiming superior performance but generally maintaining higher prices. It has said it would launch a new laptop chip later this year manufactured using a next-generation fabrication process.

The company has been spending heavily to spur growth in new areas, and some of those investments are beginning to pay off. The chip giant's results got a lift from rising sales of memory, up 58%, and the smart devices known as the internet of things, up 26%. However, revenue from those sources still represents a small portion of the total.

Write to Ted Greenwald at Ted.Greenwald@wsj.com

(END) Dow Jones Newswires

July 27, 2017 17:01 ET (21:01 GMT)

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