The world's largest semiconductor maker blew past Wall Street's estimates for revenue, earnings, and gross margin for the quarter. The strength appears to be fueled by strong sales across its business lines -- in particular for PC microprocessors and chips used in servers -- both of which notched sales gains of more than 40% compared to the same period last year.

Even more surprising was Intel's forecast for what is usually a seasonally weak second quarter. Intel said it expects second quarter revenue to come in around $10.2 billion, plus or minus $400 million. According to Thomson Reuters, analysts were projecting a consensus estimate for the second quarter revenue on the low end of that forecast, or about $9.69 billion.

Analysts have recently noted that some Intel investors were getting jittery that its gross profit margin had peaked, and that its inventories were on the rise. Intel appears to have soothed those fears; in fact, the company boosted its gross-margin forecast for the year to 64% from 61% previously, which suggests the company is optimistic for the crucial second half of the year.

"Investor psychology is mixed, given fundamental strength, yet building inventory and high chip lead times," said Craig Berger, an analyst with FBR Capital Markets, in a note last week. Intel appears to be managing its inventories, and they were only up very slightly to $2.986 billion, compared with fourth quarter inventories of $2.935 billion.

After a run up this year of 11% so far, investors had been expected to sell on the news, even if Intel beat the Street's expectations. However, the strong results and better-than-expected forecast fueled enough optimism that its shares were trading higher in after hours.

Even with the backdrop of rival Advanced Micro Devices Inc. getting more competitive again, investors may have hard time finding fault with Intel's numbers.

By: DocMemory
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