Earnings per share beat Wall Street analysts' expectations by five cents per share and Intel beat on revenue as well. When the headline numbers hit the wire, Intel (INTC) shares soared approximately 8 percent in after-hours trading but after analysts got a closer look at the numbers the shares settled for a more modest gain of approximately 2.7 percent.
Part of the reason for the big beat is an unusually low tax rate of 9.3 percent for the quarter, a 16.2 point reduction versus the prior quarter. Intel explains this was driven by a one-time refund claim and their decision to indefinitely reinvest certain prior years' non-U.S. earnings. This means previous overseas profits held abroad will be reinvested overseas to prevent having to pay US taxes.
The chip giant's report mentions client computing group revenue, which includes desktop CPUs, was down 14 percent year-over-year to $7.5 billion. Especially desktop chips were hit hard, sales collapsed 22 percent year-over-year. Notebooks did pretty bad with a 11 percent drop while tablet chip sales grew 11 percent. The good news is that data center group revenue soared 10 percent to $3.9 billion, Internet of Things revenue was up 4 percent year-over-year to $559 million but software and services revenue fell 3 percent to $534 million.
For the current quarter, Intel expects revenue of $14.3 billion, plus or minus $500 million. Full year revenue is expected to be down approximately one percent versus 2014.
Intel Corporation today reported second-quarter revenue of $13.2 billion, operating income of $2.9 billion, net income of $2.7 billion and EPS of 55 cents. The company generated approximately $3.4 billion in cash from operations, paid dividends of $1.1 billion, and used $697 million to repurchase 22 million shares of stock.Interestingly, Intel decided to lower its 2015 capex budget even further with a $1 billion cut. Current guidance is $7.7 billion, plus or minus $500 million, a far cry from the $10 billion capex budget it held before its April earnings announcement.
“Second-quarter results demonstrate the transformation of our business as growth in data center, memory and IoT accounted for more than 70 percent of our operating profit and helped offset a challenging PC market," said Intel CEO Brian Krzanich. “We continue to be confident in our growth strategy and are focused on innovation and execution. We expect the launches of Skylake, Microsoft's Windows* 10 and new OEM systems will bring excitement to client computing in the second half of 2015.”