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Why Intel’s Q3 Was a Mixed Bag Despite Strong Microchip Sales

July 20, 2016, 8:17 PM UTC
Fortune Brainstorm TECH 2016
Fortune Brainstorm TECH 2016 TUESDAY JULY 12TH, 2016: ASPEN, CO 9:15 AM A CHIP FOR EVERY HOME (AND FACTORY AND HOSPITAL) Brian Krzanich, CEO, Intel Interviewer: Adam Lashinsky, Fortune PHOTOGRAPH BY STUART ISETT/Fortune Brainstorm TECH
Stuart Isett for Fortune Brainstorm Tech

Intel reported lower-than-expected quarterly revenue as strong sales of its microchips that power data centers failed to offset a prolonged slump in demand for PC chips.

Shares of the world’s largest chipmaker fell nearly 3% in after-hours trading.

Sales from Intel’s traditional PC business, which also includes chips for mobile phones and tablets, declined 3% to $7.3 billion in the second quarter.

In contrast, global PC shipments fell less than expected in the quarter, according to research firm IDC.

Santa Clara, California-based Intel has been focusing on its higher-margin data center business as it looks to reduce its dependence on the slowing PC market that it once helped create.

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Revenue from the company’s data center business rose 5% to $4 billion from a year earlier and accounted for 30% of total revenue.

Intel (INTC), however, reported a better-than-expected profit as restructuring efforts begin to pay off. The company in April announced plans to cut 12,000 jobs, or 11% of its global workforce.

Intel’s net income fell to $1.33 billion, or 27 cents per share, in the second quarter ended July 2, from $2.71 billion, or 55 cents per share, a year earlier.

Profit for the quarter was hit by a one-time charge of $1.41 billion related to its plan to cut 12,000 jobs.

To hear more from Intel’s CEO about why he cancelled an event for Donald Trump, watch:

Excluding one time items, Intel’s profit was 59 cents per share, beating market expectations for a profit of 53 cents, according to Thomson Reuters.

Net revenue rose 2.6% to $13.53 billion, narrowly missing the average analyst estimate of $13.54 billion.