Intel earnings: Strong first quarter expected amid server, PC upgrades

Intel is expected to deliver strong first quarter results and outlook as it rides a PC and server upgrade cycle.

Wall Street is expecting Intel to report first quarter earnings of 38 cents a share on revenue of $9.83 billion on Tuesday. Gross margins are expected to be 61.27 percent. As for the outlook, Wall Street is expecting second quarter revenue of $9.68 billion with earnings of 36 cents a share.

Analysts will be watching closely for the second half outlook. Wall Street is modeling revenue of $10.4 billion for the third quarter and $11.1 billion in the fourth quarter.

Among the key comments from analysts:

Auguste Gus Richard of Piper Jaffray said in a research note:

We believe that Intel is in its best competitive position in many years heading into what we believe will be a period of strong demand for PCs. We think the company had a strong Q1 and is positioned to meet or exceed our estimates for the quarter. We expect any adjustments to our estimates will be higher post earnings. Based on our checks and conversations with industry contacts, we believe that Intel's manufacturing lead is accelerating and enhancing the company's chances to expand its sales beyond the PC in a material way over the next couple of years.

Oppenheimer analyst Rick Schafer said:

We look for a strong PC cycle in 2010 (unit growth >15% Y/Y), driven primarily by a rebound in enterprise spending–expected up 8% this year after being off a similar amount in 2009. Intel's recent launch of Nehalem-EX is helping drive a 2010 server upgrade cycle and should allow INTC to build on 2009 share gains.

Wells Fargo analyst David Wong:

Looking ahead to the rest of 2010 we are estimating full year sales growth of 17% with a gross margin of 62%, up considerably from 56% in 2009. We think that gross margin will be driven by tight capacity resulting in higher microprocessor ASPs and a favorable mix shift from the initial ramping of Intel’s recently launched Westmere-EP and Nehalem-EX server chips as well as a corporate PC refresh developing through the year.