Intel reported its highest-ever quarterly revenue and boosted its budget for factory and manufacturing investments by more than $1 billion as profits exceeded Wall Street expectations.
The results boosted Intel's stock by 3 per cent in after-hours trading. It also lifted shares of companies that supply Intel and others with chip equipment, such as Applied Materials and KLA-Tencor.
Earnings in the fourth quarter fell to $2.12 billion as profit margins eroded in part due to heightened competition. Sales rose to $9.6 billion from a previous record of $8.74 billion.
The results topped analysts' average expectation of sales of $9.42 billion. "It's a terrific report.
Speaking to analysts, Mr Andy Bryant, Intel's chief financial officer, said the company had overcome a nagging problem with swollen chip inventories, and acknowledged that its sales forecast might even be a little cautious, adding to the optimism among Wall Street analysts.
Intel, whose microprocessors run 80 percent of the world's personal computers, boosted its annual budget for spending on factories and chip-making equipment to about $4.9 billion to $5.3 billion from a $3.8 billion level in 2004.
While competition from AMD has weighed on margins, gains in manufacturing productivity in 2005 could push those numbers higher, said Mr Eric Ross, an analyst with ThinkEquity Partners.
"It doesn't bother me quite as much that gross margins are down. I think margins probably come up a little bit," he said. At the same time, Intel has found clear success with Centrino Mobile Technology, its brand of chips for notebook computers.