By Reuters
Updated: April 27, 2017 4:52 PM ET

Intel, the world’s largest chipmaker, reported lower-than-expected revenue for the first quarter, as its crucial data center business missed analysts’ estimates.

Intel’s shares (intc) were down 3.5% at $36.11 in aftermarket trading on Thursday.

Revenue from Intel’s higher-margin data center business rose 6% to $4.2 billion in the quarter, missing analysts’ expectations of $4.35 billion, according to research firm FactSet StreetAccount.

The business is crucial to Intel’s move to switch focus from the personal computer market towards making chips for data centers and Internet connected devices.

While revenue at the data center business is growing, Intel has warned that margins could be hit by higher costs, including those to update the business’ manufacturing process.

But, Intel still gets most of its revenue from selling PC chips, a business that returned to growth in 2016 due to stabilizing demand in the second half of the year.

Revenue from client computing, as Intel calls the business, rose 6% to $8 billion. Analysts were expecting revenue of $7.95 billion, according to FactSet StreetAccount.

Worldwide PC shipments grew marginally in the quarter, well ahead of an expected decline of 1.8%, according to research firm IDC.

Intel also increased its share buyback program by $10 billion, bringing the amount currently available to about $15 billion, the company said.

To further reduce its dependence on the PC market, Intel said last month it would buy autonomous vehicle technology firm Mobileye NV, thrusting itself into the forefront of the fast-growing market to develop driverless systems.

Until it struck the deal, Santa Clara-based Intel’s presence in the market was through investments in at least half a dozen start-up companies developing different components for self-driving systems.

The company’s net income rose to $2.96 billion, or 61 cents per share, in the quarter ended April 1 from $2.05 billion, or 42 cents per share, a year earlier.

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Excluding items, Intel earned 66 cents per share. Analysts were expecting a profit of 65 cents, according to Thomson Reuters I/B/E/S.

Revenue rose to $14.80 billion from $13.70 billion, but fell marginally short of analysts’ average estimate of $14.81 billion.

The company said it expects second-quarter revenue of $14.4 billion, plus or minus $500 million. Analysts on average were expecting revenue of $14.34 billion.

Intel also raised its full-year revenue forecast to about $60 billion and its adjusted profit forecast to $2.85 per share, plus or minus 5%.

Up to Thursday’s close, shares of Intel had risen about 3% this year, underperforming the roughly 6.7% gain in the broader S&P 500 index.

 

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