By Max A. Cherney and Chavi Mehta
(Reuters) -Chipmaker Intel on Thursday 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%.
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% in the June quarter compared to 30% slump in each of the previous two quarters, Canalys data showed.
Shipments rose 11.9% from the first quarter, signaling 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% to $6.8 billion, from $7.7 billion in the year-ago period.
Intel’s foundry business, which aims to make chips for other companies, reported revenue of $232 million, up from $57 million a year ago.
Sales by Intel’s data center and AI segment fell 15% to $4 billion from $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 $12.9 billion to $13.9 billion, compared to estimates of $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% for the third quarter, compared to estimates of 40.6%.
Intel shares have risen about 30% so far this year, compared to a 50% 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% of its revenue there last year.
(Reporting by Chavi Mehta in Bengaluru; Editing by Arun Koyyur and Richard Chang)
