By Wallace Witkowski, MarketWatch
Intel Corp. shares surged in the extended session Thursday after the chip giant posted a big earnings beat compared with what Wall Street analysts had been expecting, and raised its outlook for the year.
Intel /zigman2/quotes/203649727/composite INTC -0.33% shares rallied after the company reported second-quarter net income of $4.18 billion, or 92 cents a share, compared with $5.01 billion, or $1.05 a share, in the year-ago period. Adjusted earnings were $1.06 a share. Revenue declined to $16.51 billion from $16.96 billion in the year-ago quarter.
Analysts surveyed by FactSet had forecast earnings of 89 cents on revenue of $15.68 billion.
Revenue from Intel’s largest segment, client-computing or traditional PC, rose 1% to $8.8 billion when analysts expected a 6.8% decline to $8.13 billion from the year-ago period.
“Trade uncertainties created anxiety across our customers’ supply chain and drove a pull-in of client CPU orders into the second quarter,” said Bob Swan, Intel chief executive, on a conference call. “We also halted shipments to certain customers in response to the U.S. government’s revised entity list. After a thorough review, we were able to resume shipments of some products in compliance with regulations, and the net impact on the second quarter was limited.”
“Overall, Intel performed well in a very competitive PC environment and challenging data-center environment where [cloud service providers] are still chewing through product and enterprise isn’t growing,” said Pat Moorhead, principal analyst at Moor Insights and Strategy, in emailed comments.
Data-center group, or DGC, revenue fell 10% to $ 5 billion, compared with $4.89 billion expected by analysts, according to FactSet data.
Nonvolatile memory solutions revenue fell 13% to $940 million, when analysts expected $885.9 million, and “Internet of Things,” or IoT, revenue rose 12% to $986 million when the Street expected $941.1 million.
The company sees adjusted earnings of $1.24 a share on revenue of about $18 billion for the third quarter, and $4.40 a share on revenue of about $69.5 billion for the year. Back in late April, Intel had forecast an outlook of $4.35 a share on revenue of about $69 billion when analysts had been looking for $4.50 a share on revenue of $71.04 billion.
Analysts surveyed by FactSet expect $1.15 a share on revenue of $17.74 billion for the third quarter, and $4.23 a share on revenue of $68.47 billion for the year.
Intel also announced late Thursday it was selling the majority of its smartphone-modem business to Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.81% for about $1 billion in a deal expected to close in the fourth quarter. Reports of the widely-expected deal started coming out earlier in the week, putting pressure on shares of Qualcomm Inc. /zigman2/quotes/206679220/composite QCOM -0.85% , a big Apple supplier.
“While the 5G network opportunity meets each of our investment criteria, the 5G cell phone opportunity does not,” Swan told analysts on the call. “This is why we decided to exit the 5G smartphone-modem business and conduct an analysis of our options for the remaining parts of that portfolio.”
Moorhead said he doesn’t expect the deal to impact Qualcomm “for at least” three to five years.
At Thursday’s close, Intel shares were down nearly 10% since the chip maker’s previous earnings call.
In the extended session Thursday, Intel shares rose 6%, following a 1.4% decline in the regular session to close at $52.16. In comparison, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.19% and the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.0020% both declined 0.5%, the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.07% fell 1% and the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -0.55% fell 1.7% on Thursday.
Of the 41 analysts who cover Intel, 14 have buy or overweight ratings, 17 have hold ratings and 10 have sell or underweight ratings.