The Stock of Intel Rallies After Earnings Showed Strong PC Sales and a Strong Performance in Ai Data Centers

Intel Corporation experienced a substantial surge in its shares during the extended session on Thursday, driven by a surprising profit announcement. While data-center sales performed better than anticipated, the notable improvement in PC product sales played a pivotal role in driving margin growth.

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Following the announcement, Intel's shares (INTC) surged approximately 8% after regular trading hours, building upon a 0.6% increase during the regular session, closing at $34.55.

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For the second quarter, the company reported a net income of $1.48 billion, equivalent to 35 cents per share, in contrast to a loss of $454 million, or 11 cents per share, during the same period last year. After adjusting for restructuring charges and other items, Intel reported earnings of 13 cents per share, compared to 28 cents per share in the previous year.

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However, revenue for the second quarter declined to $12.95 billion from $15.32 billion in the corresponding period the year before, with adjusted gross margins reaching 39.8%.

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Notably, the company's forecast had projected an adjusted second-quarter loss of 4 cents per share on revenue ranging from approximately $11.5 billion to $12.5 billion. Adjusted gross margins were expected to be around 33.2% for the quarter. In contrast, analysts surveyed by FactSet had anticipated a loss of 4 cents per share on revenue of $12.12 billion.

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During a conference call, Intel's Chief Financial Officer, David Zinsner, explained that the margin outperformance was primarily driven by higher revenue. The revenue outperformance was more significant in the Intel client (PC) business than in the data center segment. The company reported PC-group sales of $6.8 billion and data-center sales of $4 billion, surpassing the analysts' forecasts of $6.08 billion and $3.8 billion, respectively.

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Edward Jones analyst Logan Purk noted that most of the improvement in Intel's gross margin came from the unexpected growth in the PC business. The magnitude of the client computing growth and the rapid recovery of the PC market were surprising to analysts.

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While Intel is pursuing opportunities in the AI market, Intel's Chief Executive, Pat Gelsinger, emphasized the company's commitment to compete in the field dominated by Nvidia Corp. and, to a lesser extent, by Advanced Micro Devices Inc.

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Looking ahead, Intel forecasts third-quarter earnings of approximately 20 cents per share on revenue ranging from $12.9 billion to $13.9 billion, with adjusted gross margins around 43%. Analysts surveyed by FactSet had projected third-quarter adjusted earnings of 16 cents per share on revenue of $13.22 billion.

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Year-to-date, Intel shares have gained nearly 31%, outperforming the PHLX Semiconductor Index (SOX) with a 49% surge, the S&P 500 with an 18% growth, the Nasdaq Composite with a 34% gain, and the Dow Jones Industrial Average, which has risen more than 6%.

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