The PC refresh cycle helped Intel beat Q2 earnings expectations

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Intel credits its better-than-expected results to the PC refresh cycle

Intel (INTC) announced its Q2 2014 earnings recently. Its revenue of $13.83 billion and earnings per share of 55 cents beat analysts’ estimates of $13.69 billion and 52 cents per share, respectively. The results were also better than Intel’s own expectations when it revised its outlook for the second quarter on June 12.

Intel also provided a better-than-expected outlook for the third quarter. The company now expects revenues of $14.4 billion for the third quarter. This projection is better than analysts’ expectations of $14.03 billion. Happy investors pushed Intel’s stock up 6% during after-market hours.

Intel specifically credited its better-than-expected results to the PC refresh cycle for businesses. The main reason for increased business PC demand was the end of Microsoft’s (MSFT) support for Windows XP on April 8.

Intel Revenues Distribution

PC Client and Data Center groups remain Intel’s most valuable businesses

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Intel dominates the PC processor market, with AMD (AMD) a distant second in this space. As the above chart shows, PC Client Group and Data Center Group contribute about 90% of Intel’s revenues. PC Client Group revenues increased 6% from a year ago. This revenue increase was driven by unit volume growth of 9%, which becomes 20% when we include tablets as well.

The PC platform’s average selling price dropped 4%, though. According to a report from Gartner, worldwide PC shipments increased 0.1% in the second quarter after eight quarters of consecutive declines. This means Intel did better than the overall market, so it gained share in the PC chipset market.

The Data Center Group provides chips to servers, networking, and storage products. This division’s revenues saw better-than-expected 19% growth from a year ago. This revenue increase was driven by a 9% increase in unit volumes and an 11% increase in average selling price. If Intel continues to do well, it will benefit ETFs like the VanEck Vectors Semiconductor ETF (SMH) and NASDAQ Technology Dividend Index Fund (TDIV), which have high exposure to Intel.

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