By Narottam Medhora
(Reuters) – Intel Corp reported lower-than-expected quarterly revenue due to an unexpected slowdown in growth at its data center business, on which the world’s largest chipmaker is banking to reduce its reliance on the personal computer market.
The company’s shares fell nearly 4 percent to $35.97 in trading after the bell on Thursday.
Revenue from Intel’s higher-margin data center business rose 6 percent to $4.2 billion in the first quarter. That was less than the 9 percent jump a year-ago and the 8 percent increase in the fourth quarter.
“I think the Street was looking for slightly better than that,” Stifel analyst Kevin Cassidy said.
Analysts were expecting revenue to increase 10 percent to about $4.4 billion, according to FactSet StreetAccount.
The slowdown in revenue growth comes after Intel warned in February that business’s margins could be hit by higher costs.
However, Intel still expects the business to grow in the high single-digit percentage rate this year, Chief Executive Brian Krzanich said on a call.
Intel marginally raised its full-year revenue forecast, which Krzanich said was due to average selling prices across its businesses trending ahead of expectations.
The Santa Clara-based company expects 2017 revenue of about $60 billion. It had earlier forecast revenue would be flat compared with 2016 revenue of $59.4 billion.
Intel increased its share buyback program by $10 billion to about $15 billion and also raised its 2017 adjusted profit forecast by 5 cents to $2.85 per share, plus or minus 5 percent.
The company has previously said it expects its deal to buy autonomous vehicle technology firm Mobileye NV, announced last month, to boost adjusted profit.
The acquisition thrusts Intel into the forefront of the market to develop driverless systems. The deal, along with a focus on cloud computing, will also help Intel reduce its dependence on the PC market.
Intel gets most of its revenue from selling chips used in PCs. Its PC business returned to growth in 2016 as demand stabilized in the second half of the year.
Demand also unexpectedly edged up in the first quarter, according to research firm IDC. That helped revenue from the client computing group, as Intel calls the business, increase 6 percent to $8 billion, matching estimates.
Intel’s total revenue rose 8 percent to $14.80 billion, falling short of analysts’ estimate of $14.81 billion, according to Thomson Reuters I/B/E/S.
Net income jumped 45 percent to $2.96 billion. Excluding items, Intel earned 66 cents per share, one cent above analysts’ estimate. (http://bit.ly/2pr8dBB)
(Reporting by Narottam Medhora in Bengaluru; Editing by Savio D’Souza)