Intel quarterly revenue falls short of estimates, blamed on data centre business

Chipmaker Intel has reported lower-than-expected revenue for the first quarter, as its crucial data centre business missed analysts' estimates.

Intel's shares were down 3.5 percent at US$36.11 in aftermarket trading on Thursday.

Revenue from Intel's higher-margin data centre business rose 6 percent to US$4.2 billion in the quarter, missing analysts' expectations of US$4.35 billion, according to research firm FactSet StreetAccount.

The business is crucial to Intel's move to switch focus from the personal computer market towards making chips for data centres and internet-connected devices.

While revenue at the data centre business is growing, Intel has warned that margins could be hit by higher costs, including those to update the business' manufacturing process.

But, Intel still gets most of its revenue from selling PC chips, a business that returned to growth in 2016 due to stabilising demand in the second half of the year.

Revenue from client computing, as Intel calls the business, rose 6 percent to US$8 billion. Analysts were expecting revenue of US$7.95 billion, according to FactSet StreetAccount.

Worldwide PC shipments grew marginally in the quarter, well ahead of an expected decline of 1.8 percent, according to research firm IDC.

Intel also increased its share buyback programme by US$10 billion, bringing the amount currently available to about US$15 billion, the company said.

To further reduce its dependence on the PC market, Intel said last month it would buy autonomous vehicle technology firm Mobileye NV, thrusting itself into the forefront of the fast-growing market to develop driverless systems.

Until it struck the deal, Intel's presence in the market was through investments in at least half a dozen start-up companies developing different components for self-driving systems.

The company's net income rose to US$2.96 billion, or 61 cents per share, in the quarter ended April 1 from US$2.05 billion, or 42 cents per share, a year earlier.

Excluding items, Intel earned 66 cents per share. Analysts were expecting a profit of 65 cents, according to Thomson Reuters I/B/E/S.

Revenue rose to US$14.80 billion from US$13.70 billion but fell marginally short of analysts' average estimate of US$14.81 billion.

The company said it expects second-quarter revenue of US$14.4 billion, plus or minus US$500 million. Analysts on average were expecting revenue of US$14.34 billion.

Intel also raised its full-year revenue forecast to about US$60 billion and its adjusted profit forecast to US$2.85 per share, plus or minus 5 percent.

Up to Thursday's close, shares of Intel had risen about 3 percent this year, underperforming the roughly 6.7 percent gain in the broader S&P 500 index.

Reporting by Narottam Medhora. Editing by Savio D'Souza