Cloud computing growth powers Intel’s strong Q3

Intel comfortably beat Wall Street estimates on revenue and earnings per share in its third quarter report yesterday, with growth of cloud computing.

However profit at $3.1 billion was down 6 per cent from $3.3 billion a year ago.

CEO Brian Krzanich said he saw the slumping market for personal computers ''beginning to stabilize'' even as the growing needs of the infrastructure that powered the smart and connected world continued to add to Intel's bottom line.

The chip giant faced challenges in several areas, with a weak market for PCs adding to economic woes in China, a major market, but had balanced that downtrend with growth in sales of chips to data centers, in the Internet of Things business and in memory chip sales.

''All in all, they had a really solid quarter,'' said Betsy Van Hees of Wedbush Securities. ''They're performing well despite a challenging market,'' santacruzsentinel.com reported.

According to Stacy Rasgon, an analyst with Sanford Bernstein, Intel failed to meet growth targets for its group that sells to data centers, which saw a 12 per cent increase in sales from a year earlier, short of a target of 15 percent.

''It was the best they could do in a bad environment, to hold their own,'' he said.

Revenue for the quarter came in at $14.5 billion, which was in-line with expectations. Gross margin was down slightly to 63 per cent, while operating income and net income were also slid 8 per cent to $4.2 billion and $3.1 billion respectively. Earnings per share were down 3 per cent to $0.66.

Q3 saw Intel launch Skylake its 6th generation Core processor, and it also announced 3D X-Point memory technology. Sales of Skylake had just starte, and according to commentators a broader rollout was expected in Q4.

The Client Computing Group was the biggest underperformer from Intel with revenue for the group down 7 per cent to $8.5 billion with platform volumes down 19 per cent.

But the biggest drop from Intel was in the tablet sector, with Intel powered tablet sales down 39 per cent.

The chip maker's Data Center Group posted a  much stronger quarter with revenue up 1 per cent at $4.1 billion. Much of this was driven by growth in cloud computing which is growing even faster the company's projection.