Intel Corp on Thursday beat analysts’ estimates for quarterly profit and revenue, driven by its high-margin data center business and strong demand for its PC chips, sending its shares up as much as 6 percent in extended trading, although those gains later evaporated on concerns about US trade tensions with China.
The company’s 39 percent rise in profits and better-than-expected fourth-quarter forecast should come as a relief for investors after three days of grim news from other major chipmakers that have shaken stock markets globally.
Intel executives said they do not see any near-term weakness from the trade tensions or Chinese economy, despite large data center customers and consumer PC factories being located there.
However, Intel’s share gains in extended trading diminished to less than 1 percent after Intel interim chief executive Bob Swan said that trade tensions could be a “headwind” in the longer term next year.
Texas Instruments Inc, STMicroelectronics NV and SK Hynix Inc have all warned of slowing demand for the remainder of the year.
Intel bucked the trend thanks to strong sales of chips for PCs, the second quarter in a row that the company benefited from the sector after years of stagnation in that business, and increasing sales of iPhone modem chips.
Swan told reporters that the PC chip strength came from computer purchases by business customers in developed economies, as well as gamers building high-end machines.
Many firms are upgrading their PCs because Microsoft Corp has said that it would end support for some older versions of its Windows operating system in early 2020.
Also boosting Intel sales this quarter was its business for modems, which connect smartphones to wireless data networks, which was up 131 percent in the quarter. The gain resulted from Intel completely replacing rival modem supplier Qualcomm Inc in the latest models of Apple Inc’s iPhone.
However, Swan said that the modem sales were also pressuring Intel’s margins and contributed to the firm lowering its fourth-quarter operating margin outlook to 34.5 percent.
Intel predicted fourth-quarter revenue of US$19 billion and adjusted earnings of US$1.22 per share.
On a conference call with investors, Swan said that he expected capital expenditures on memory chips to be “a little bit lower” next year.
The company’s net income rose to US$6.40 billion, or US$1.38 per share, in the quarter that ended on Sept. 29, from US$4.52 billion, or US$0.94 per share, in the same period last year.
Excluding items, the company earned US$1.40 per share. Net revenue rose 18.7 percent to US$19.16 billion.
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