Chipmaker Intel on Thursday (Jul 27) posted a surprise profit as a PC market slump started to ease, and it forecast third-quarter earnings above Wall Street expectations, sending its shares up over 5 per cent.
The market for personal computers has tumbled over the past year, with inventory piling up because consumers had already bought machines needed during the pandemic.
But the glut has started to ease, with PC shipments falling only 11.5 per cent in the June quarter compared to 30 per cent slump in each of the previous two quarters, Canalys data showed.
Shipments rose 11.9 per cent from the first quarter, signalling that vendors' appetite for fresh stock will rebound in the second half of the year.
After over four consecutive quarters of deep declines across its biggest segment that includes personal computers, revenue dropped 12 per cent to US$6.8 billion, from US$7.7 billion in the year-ago period.
Intel's foundry business, which aims to make chips for other companies, reported revenue of US$232 million, up from US$57 million a year ago.
Sales by Intel's data center and AI segment fell 15 per cent to US$4 billion from US$4.7 million in the year-ago quarter.
Cloud majors Microsoft and Alphabet expect to ramp up spending on data centers. While the bulk of that benefit will go to companies like Nvidia that make chips for artificial intelligence, the trend could provide some benefit to the chip industry.
The company forecast adjusted current-quarter earnings per share of 20 cents. Analysts polled by Refinitiv were expecting 16 cents.
Intel forecast adjusted current-quarter revenue of about US$12.9 billion to US$13.9 billion, compared to estimates of US$13.23 billion.
Intel said it expects profit margins to improve in the second half. Its adjusted margins have declined to the lowest since early 2021 when it embarked on a multi-year transition into a contract chipmaker.
It forecast adjusted gross margin of 43 per cent for the third quarter, compared to estimates of 40.6 per cent.
Intel shares have risen about 30 per cent so far this year, compared to a 50 per cent rise on the Philadelphia SE Semiconductor index in anticipation of an industry recovery.
A wobbly recovery in China, since the company lifted its "zero-COVID" policy, has also weighed on Intel, which made 27 per cent of its revenue there last year.