In a new regulatory filing, the semiconductor giant pointed to higher average selling prices for client and server CPUs as the primary reason revenue grew for both segments, even as it sold lower volumes of processors compared to the same period last year.
Intel achieved its blockbuster first quarter by selling pricier CPUs and raising prices in the face of pent-up demand from AI data centers and internal supply constraints.
In its quarterly 10-Q filing with the U.S. Securities and Exchange Commission on Friday, the semiconductor giant pointed to higher average selling prices (ASPs) for client and server CPUs as the primary reason revenue grew for both segments, even as it sold lower volumes of processors compared to the same period last year.
[Related: Intel CEO Lip-Bu Tan: ‘This Is A Fundamentally Different Company Today’]
With the higher ASPs driving Intel’s data center revenue to grow by 22 percent year over year and its PC revenue to increase by 1 percent in the first quarter, the chipmaker saw its total revenue grow by 7 percent for the period, surpassing Wall Street’s expectations.
The chipmaker’s stock price was up more than 22 percent on Friday.
With inference and agentic AI workloads driving demand for CPUs, the Santa Clara, Calif.-based company has been trying to dig itself out of a shortage that has lasted for several months by improving its factory output.
Kent Tibbils, vice president of marketing at Fremont, Calif.-based distributor ASI, told CRN on Friday that his company is seeing with channel partners what Intel is experiencing: a greater need for higher-end CPUs to support a growth in inference workloads.
“We’re in the early phases of seeing this inferencing starting to take hold, especially in enterprise, which is good for the channel,” he said.
How Higher ASPs Drove Revenue Growth
In the data center business, 16 percent of the revenue growth came from server CPUs, which was mainly driven by a 27 percent increase in ASPs, according to the 10-Q. Two factors caused ASPs to go higher: Intel selling a “higher mix of premium products” and “demand-based pricing actions in part to offset higher input costs.”
At the same time, Intel said it sold 5 percent fewer server CPUs in the first quarter compared to the same period last year.
Even then, Intel CFO David Zinsner said on its Wednesday earnings call that the company had “better-than-expected available supply” during the period.
Nevertheless, the chipmaker said in the SEC filing, “market demand exceeded our available product supply due to internal supply constraints.” This, it added, “limited our ability to fully meet customer demand.”
Zinsner also noted on the call how a significant increase in the core counts of the CPUs it selling to data centers is creating a “meaningful” uplift on ASPs. At the same time, he said the pricing actions played a smaller role.
As for the PC business, the dynamics were similar, albeit with far less revenue growth. A little more than half of the 1 percent revenue growth within the unit came from client CPUs, which was mainly driven by a 16 percent increase in ASPs, per the 10-Q. This was driven by the same two factors that raised server ASPs: Intel selling more premium products and raising prices in part to offset higher material costs.
This ASP growth coincided with the launch of Intel’s Core Ultra Series 3 processors, which Intel CEO Lip-Bu Tan said represented the “fastest new product ramp” it saw in five years.
Intel Expects Better Supply, Price Hikes To Continue Revenue Growth
For the second quarter, Intel is forecasting a revenue range of $13.8 billion to $14.8 billion, which would represent sequential growth of 2 percent on the low end and 9 percent on the high end. Helping drive this is the expectation that double-digit server growth will persist.
Zinsner said the company expects continued growth across its two main businesses due to “improved supply and a full quarter of pricing actions.”
The chipmaker has previously said that it expected the CPU shortage to peak in the first quarter as it works to crank out more products from its factories.
On this week’s earnings call, Tan reported that the company is making progress with its Intel 4 and Intel 3 manufacturing nodes as the yields for its most advanced process, Intel 18A, “are now running ahead of the internal projection.”
This, the CEO added, represents “a meaningful inflection in our execution and our factory finished goods output.”
“A year ago, the conversation about Intel was about whether we could survive,” he said earlier on the call. “Today is about how quickly we can add manufacturing capacity and scale our supply to meet enormous demand for our products. This is a fundamentally different company today, and we still have a lot of work ahead.”
