Intel reported strong fourth-quarter earnings and 8% revenue growth, hitting Wall Street’s targets for financial performance thanks to strong datacenter revenues.

The good results come amid a variety of challenges, including rising competition from rival Advanced Micro Devices, which announced at the recent CES 2020 tech show that it had the fastest x86 chip in the world with its 64-core Threadripper processor, as well as key wins for AMD’s Ryzen 2 processors.

Intel, meanwhile, has had challenges getting enough chips into the market built with its 10-nanometer process (which it says is equivalent to 7-nm processes from competitors). But today’s news is good, considering Intel is a bellwether for the tech economy.

Intel reported fourth-quarter revenues of $20.2 billion, up 8% from a year ago and driven by 19% growth in the datacenter group compared to a year ago. Adjusted earnings per share hit $1.52 a share. Analysts expected Intel to report $1.25 in adjusted earnings per share on revenues of $19.2 billion.

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“In 2019, we gained share in an expanded addressable market that demands more performance to process, move and store data,” Intel CEO Bob Swan said in a statement. “One year into our long-term financial plan, we have outperformed our revenue and EPS expectations. Looking ahead, we are investing to win the technology inflections of the future, play a bigger role in the success of our customers and increase shareholder returns.”

Lenovo shows a foldable laptop at Intel's CES event.

Above: Lenovo shows a foldable laptop at Intel’s CES event.

Image Credit: Dean Takahashi

Intel’s stock price rose 7% in after-hours trading to $67.78 a share. With the latest numbers, Intel beat its expectations for the full year, with total revenues of $72 billion and non-GAAP earnings per share of $4.87, compared to 2018 revenues of $70.8 billion and EPS of $4.58. Intel had expected that it would generated non-GAAP earnings per share of $4.60 on revenue of $71 billion.

The recovery in datacenter revenues is a welcome relief, as Intel has traditionally been strongest in that market. Intel is also battling Nvidia and others to produce chips that accelerate artificial intelligence functions.

In 2019, Intel said it generated $33.1 billion in cash from operations, and returned $19.2 billion to shareholders in the form of dividends and stock buybacks. Intel also spent $13.4 billion on research and development and reduced its overall spending to 27% of total revenue.

In the fourth quarter, the datacenter group reported revenue of $7.2 billion, up 19% from a year ago. The internet of things group had revenue of $920 million, up 13%. Mobileye had $240 million in revenue, up 31%. Intel’s memory group had revenue of $1.2 billion, up 10%. Programmable solutions generated $505 million, down 17%, and PC-centric revenues were $10 billion, up 2%.

Intel said it saw strong demand from cloud service providers for its datacenter processors. Intel acquired Habana Labs for $2 billion in Q4 to boost its AI portfolio for the datacenter.

In IoT, the business was strong in retail and transportation. Mobileye saw revenue from its advanced driver assistance systems (ADAS). The PC business saw higher modem sales and desktop platform volume. Intel announced its 10-nanometer 10th Gen Intel Core processors at CES and said PC makers have introduced 44 systems with the chips.

Earlier this week, Intel named Omar Ishrak, CEO of Medtronic, as its new chairman, replacing Andy Bryant, who will stay on the board until the next stockholder meeting. Intel also added Square’s seller lead Alyssa Henry to its board.

“Intel had a great Q4 in spite of increased competition and supply challenges,” said Patrick Moorhead, analyst at Moor Insights & Strategy, in an email. “The ‘data centric’ businesses carried the day with each business driving double digit growth, except for FPGAs. Even PCs were up, which was a big surprise for me. The biggest things Intel needs to do to keep this going is to get its next-generation 10nm designs out and in-market.”