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Intel Rises as Q3 Sales and Earnings Beat Forecasts

Sales into PCs still falling, data center group still rising.

Justin Doly / Getty

Shares of Intel rose after hours as the world’s largest chip maker reported third-quarter results that were better than analysts had forecast.

Intel posted per-share earnings of 64 cents, which was 3 percent lower than a year ago, but which beat the consensus view of 59 cents. Revenue, at $14.5 billion, rose 10 percent versus the year-ago quarter and also beat consensus estimates of $14.2 billion. Shares rose 28 cents to $32.32 after the results were announced.

The company said in a statement that it expects revenue in the fourth quarter to come in at $14.8 billion, plus or minus $500 million. If it hits the middle of that forecast range, sales would be up 2 percent versus last year’s fourth quarter. Intel said it expects a gross margin of 62 percent, plus or minus a couple of points, which would represent a decline of about 2 percent. (It doesn’t forecast earnings.)

Sales in Intel’s Client Computing unit, which is devoted to selling chips for PCs, were $8.5 billion, down 7 percent from the year-ago quarter. Results in the Data Center Group, where it sells chips for use in servers and networking gear, rose 12 percent to $4.1 billion. Sales in the Internet of Things group rose 10 percent to $581 million. Software and services revenue was flat at $556 million.

Update: Intel shares turned south as the company pared back its expectations for growth in the data center group. Having forecast 15 percent growth in the current fiscal year, Intel CEO Brian Krzanich said on a conference call that the company now expects growth that will be “slightly lower than expectations at the beginning of the year as a result of weaker than expected macro-economic growth,” and will end up in the “low double digits.”

The context here is that the data center group is Intel’s second largest by revenue after its PC chip unit. But it’s the most profitable unit of all, and has generally been seen as Intel’s saving grace as the PC business has declined. It was a $14 billion business last year and is projected to hit $20 billion by 2017.

Despite paring back the more aggressive growth expectations, Krzanich sounded a bullish note for next year saying the company expects to “expand our footprint in the data center” with technologies like silicon photonics for connecting computers and very high speeds, and new chips for networking equipment.

Pat Moorhead said the results were mostly good news strong, given that Intel has broadened its reach into lines of business less tied to personal computing. “Given a very weak PC market, Intel did well on revenue, gross margin and earnings, because the its business is balanced out by the data center group and its memory business,” he said. “The diversification plan and all the investments into flash memory, cloud servers, storage and networking appear to be paying off.”

As of 3:05 P.M. Pacific Time, Intel shares are trading lower in the after-hours markets by more than 3 percent to $30.95 after closing at $32.04 during the regular session.

This article originally appeared on Recode.net.

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