Intel has validated the currently held perception that the microchip industry is recovering after a lengthy stagnation, expecting healthier sales this year than Wall Street projected.
Thanks to decent demand in Cloud computing, Intel Corp's profit in its tightly-monitored data center business soared almost 20 percent, helping the chip giant beat Q4 revenues and send its stocks up 7 percent in Friday's pre-market sessions.
In an interview, Intel Chief Financial Officer George Davis disclosed that revenues in Cloud computing rallied 48 percent year-on-year for the fourth quarter, a trend analysts said might continue in the coming months.
The chipmaker based in Santa Clara, California estimates profits of around $73.5 billion this fiscal year, more than $1 billion ahead of Wall Street projections, data from Refinitiv IBES showed.
No specific names of clients were named by Davis, but so-called "hyper scale" Cloud companies like Amazon Web Services and Microsoft Corporation in the US, and Baidu Inc and Alibaba Group Holding in China, all buy Intel chips for their data centers whose capacity they rent out to big enterprises.
In a Reuters interview, Davis said what the markets are seeing are "really robust demand" from cloud users.
The chipmaker stated that its shift to a new method of chip-manufacturing innovation is going better than it anticipated and will improve its ability to develop microchips for desktop computers, in a sign that the manufacturing dilemma that hounded chip companies in the past year are beginning to subside.
Davis noted that Intel is optimistic it will help narrow the gap in client demand the company has been facing, stressing that they believe "all of this will be fixed this year."
The company's robust forecast follows Wednesday's strong estimates from chip manufacturer Texas Instruments and last week's outlook of a much bigger demand for chips at Taiwan Semiconductor Manufacturing Co Ltd.
Market observers see 2020 as a "semiconductor recovery year," driven by both smartphone and network upgrade expenditures for 5G technologies, analysts said.
Nonetheless, Davis said that the optimistic outlook was not directly linked to the recent trade agreement signed by China and the US.
Following years of buyouts under previous executives outside its key areas of making chips, Intel CEO Bob Swan has set out a target of becoming more focused about operational costs, easing down investments in areas such as memory chips and fixing non-performing assets.
Intel has so far expanded on its core sources of revenues, like personal computers and data hubs, areas where sales exceeded projections of Wall Street in the fourth quarter.
