Business PC customers helped Intel drive 40 percent growth in second-quarter profit, helping make up for a more than $1 billion operating loss in the chipmaker's mobile unit and softer results in the consumer-PC market.
The company's board also approved an increase of $20 billion to its share buyback program, with Intel forecasting about $4 billion in share repurchases in the third quarter and additional repurchases in the fourth quarter.
Shares rose about 4 percent after hours to $33 on stronger-than-predicted results and an upbeat third-quarter revenue forecast.
Intel, which provides most of the chips running PCs and server systems, has been hurt by a consumer shift away from desktop and laptop computers and toward smartphones and tablets. However, Intel is benefiting from improvement in the shrinking PC market, thanks in part to more business customers upgrading to machines that run the newer Windows 8 operating system, after Microsoft ended technical support for Windows XP system earlier this year.
Intel said Tuesday that its PC client unit posted a 41 percent rise in operating profit to $3.73 billion, on a 6 percent increase in revenue from the year ago. The data-center business reported a 40 percent rise in profit, on 19 percent revenue growth.
In a sign of a potential rebound in the flagging PC space, researcher IDC last week said global PC shipments fell by only 1.7 percent in the second quarter, marking the smallest decrease since 2012.
While business-PC and data-center demand was strong, Intel faces questions about whether the company can gain traction on the mobile market, and what it will do after the Windows 8 refresh cycle ends, as consumer-PC interest remains challenged. Expanding into chips powering mobile devices and the Internet of Things -- a concept involving connecting appliances, devices, and everyday objects -- has been a a focus of Chief Executive Officer Brian Krzanich. But, Intel has struggled to make a profit from its mobile chips business while competing with rival Qualcomm, which holds a dominant position in the mobile space.
The mobile and communications group -- which includes chips for phones and tablets -- reported an operating loss of $1.12 billion during the quarter, compared with a loss of $761 million a year earlier, on a substantial drop in revenue.
"It's pretty impressive that they were able to put up such strong numbers," considering the "shocking loss" in the mobile segment, said Betsy Van Hees, a chips analyst for Wedbush Securities. She added that Wall Street is likely to start wondering whether Intel will change direction with its mobile efforts following that loss.
"Clearly we don't go into businesses to lose money and we believe that over time we can make this into a profitable business," Krzanich said on a conference call with analysts. "We have some ground to make up."
He added that that company sees mobile as a "strategic area" for Intel, with the company needing to be involved in the evolution of products becoming more personal, mobile, and connected.
Both mobile and Internet of Things sales remain tiny compared with its core PC and data-center segments. The Internet of Things segment posted a 26 percent rise in operating profit to $155 million, with revenue rising to $539 million.
For the latest period, Intel posted a profit of $2.8 billion, or 55 cents a share, up from $2 billion, or 39 cents a share, a year earlier. Analysts polled by Thomson Reuters expected earnings of 52 cents a share.
Revenue grew 8 percent to $13.83 billion. The company last month raised its revenue expectations for the period to $13.7 billion, plus or minus $300 million, citing stronger-than-expected demand for business PCs.
Gross profit margin, a closely watched metric, jumped to 64.5 percent from 58.3 percent.
Intel also forecast third-quarter revenue of $14.4 billion, plus or minus $500 million, compared with Wall Street expectations of $14.03 billion. The company also said it expects to post revenue growth of about 5 percent for the full year, slightly higher than its prior expectations.