Intel CEO credits solid Q2 results to Internet of Things, data center growth

UPDATED: During the shareholders call on Wednesday, Krzanich provided a little more color on Intel's chip roadmap with an explainer rooted in Moore's Law.

Intel published better-than-expected second quarter financial results after the bell on Wednesday.

The tech giant reported a net income of $2.7 billion, or 55 cents per share (statement).

Non-GAAP earnings were 55 cents per share on a revenue of $13.2 billion, down five percent from the year prior.

Still, Wall Street was looking for earnings of 50 cents per share with $13.04 billion in revenue.

Intel CEO Brian Krzanich credited the results to growth in three departments -- memory, data centers and the Internet of Things -- altogether of which he noted accounted for more than 70 percent of operating profit.

Those units also made up for continued pitfalls surrounding the PC space.

Data centers accounted for $3.9 billion in revenue, up 10 percent year-over-year. Internet of Things jumped four percent year-over-year to $559 million.

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On the downward trend, software and services accounted for $534 million in revenue, down three percent year-over-year, while the client computing group delivered $7.5 billion, down 14 percent annually.

"We expect the launches of Skylake, Microsoft's Windows 10 and new OEM systems will bring excitement to client computing in the second half of 2015," added Krzanich, in prepared remarks.

Skylake, the code name for Intel's sixth-generation Core processor aimed at PCs, is slated to drop during the second half of 2015.

For the current quarter, Wall Street is looking for non-GAAP earnings of 56 cents per share with $14.1 million in revenue.

Intel responded with third quarter revenue guidance of $14.3 billion, plus or minus $500 million. However, Intel warned full year revenue is expected to drop by roughly one percent year-over-year.

UPDATE: During the shareholders call on Wednesday, Krzanich provided a little more color on Intel's chip roadmap with an explainer rooted in Moore's Law:

Just last quarter, we sell celebrated the 50th anniversary of Moore's Law. In 1965, when Gordon's paper was first published, he predicted a doubling of transistor density every year for at least the next 10 years. His prediction proved to be right and in fact, in 1975 looking ahead to the next 10 years, he updated his estimate to a doubling every 24 months. These transitions are a natural part of the history of Moore's Law and are a byproduct of the technical challenges of shrinking transistors while ensuring they could be manufactured in high volume.

As node transitions lengthened, we adapted our approach. This strategy created better products for our customers and a competitive advantage for Intel. It also disproved the death of Moore's Law predictions many times over. The last two technology transitions have signaled that our cadence today is closer to two and-a-half years than two.

Thus, following Skylake, Intel is preparing to trot out a third 14-nanometer product with the moniker "Kaby Lake." The upcoming chip is said to be built on the same foundation of Skylake but "with key performance enhancements."

A 10-nanometer model with the code name Cannon Lake is promised to follow during the second half of 2017.

In response to some push back from analysts and investors curious about the delay for the 10-nanometer edition, clarified that Intel hopes to bring the time frame back to two years eventually.

"Remember on all of these technologies, each one has kind of its own recipe of complexity and difficulty. 14 to 10, same thing that happened when 22 to 14," Krzanich remarked.

CORRECTION: This post has been updated to reflect the name for the third 14-nanometer chip. The correct name is Kaby Lake instead of just Lake.