Intel beat earnings expectations for the first quarter and raised its full-year revenue and profit forecasts last night.
This came as the company reported its biggest-ever quarterly jump in its data centre business and small but steady growth in its personal computer business.
Shares of the California-based chipmaker rose 5.4% to $55.95 in after-market trading after it said it expects full-year revenue of $67.5 billion, up $2.5 billion from prior guidance.
Intel has been focused on transforming itself from a supplier of processors for personal computers to a maker of chips for growing data centre business and newer areas such as driverless cars and artificial intelligence.
That shift appeared to be taking hold as revenues for Intel's data centre business accounted for almost half of the company's revenue in the first quarter, the highest proportion ever.
Intel said fresh demand for applications such as artificial intelligence fueled the data center business.
But its chief financial officer Robert Swan warned that the brisk growth of that business in the past two quarters, particularly from business customers building out their own computing clouds, would be hard to match in the second half the year.
But the better than expected results and brighter forecast pushed Intel shares to their highest level in at least five years.
The data centre results also suggest the chipmaker's large customers have not been deterred by two chip flaws that emerged earlier this year.
Intel said it plans to allot $14.5 billion to capital spending this year, much of which will go toward building up its relatively new memory chip business.
But the company also said $1.7 billion of its free cash flow for the quarter came from long-term supply agreements for its memory business, which could help protect the company against a drop in memory prices that has spooked chip investors this year.
That business grew 20% year over year to $1 billion.
Intel executives also said the unit that contains its modem chips that help Apple's iPhones connect to mobile data business will grow faster than the rest of Intel's sales.
Intel's Swan said investments in that division to ramp it up could compress Intel's margins in the short term.
Revenue from Intel's client computing business, which supplies chips to PC makers and is the biggest contributor to sales, rose 3% to $8.2 billion, beating estimates of $7.91 billion, according to Thomson Reuters.
Revenue from the data centre business posted a record gain of 24% to $5.2 billion, beating estimates of $4.73 billion.
The company's net income rose to $4.45 billion, or 93 cents per share, in the quarter ended March 31, from $2.96 billion, or 61 cents per share, a year earlier.
Net revenue rose to $16.07 billion from $14.80 billion.
Excluding items, the chipmaker earned 87 cents per share.
Analysts on average were expecting Intel to report a profit of 72 cents per share on a revenue of $15.08 billion, according to Thomson Reuters.