Strong server demand in enterprises and small businesses reflects the growth of the Internet and the build-out of cloud computing capacity.
Intel delivered surprisingly strong second quarter financial results, sending its stock surging in after-hours trading.
The company reported second-quarter revenue of $10.8 billion, an increase of 34% year-over-year.
Intel's operating income for Q2 came in at $4.0 billion. It reported $2.9 billion in net income and EPS of 51 cents.
"Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company's 42-year history," said Paul Otellini, Intel president and CEO, in a statement. "Our process technology lead plus compelling architectural designs increasingly differentiate Intel-based products in the marketplace."
Intel's PC Client Group posted a 2% increase in revenue, with record mobile microprocessor revenue.
The company's Data Center Group saw 13% sequential revenue growth, with record server microprocessor revenue.
In a conference call for investors, Otellini said Intel benefited from the broad-based return of the enterprise and small business segments.
He attributed some of the enterprise growth to the PC upgrade cycle. Large companies, he said, are seeing their old machines costing more to keep on their books than they are worth and are eager to upgrade to Windows 7.
Otellini said Intel had shipped 75 million Atom processors and expected to see 40 million Atom-based netbooks shipped this year.
"Our Atom business also performed very well, growing 16% sequentially," Otellini said, noting that new Atom business can be expected to come from embedded devices and from the companies working on Google TV-related products.
Google has said Google TV devices will be available later this year from partners like Sony.
Otellini also noted that Intel's booming data center business was benefiting from the cloud computing build-out. Companies, he said, were buying new equipment to meet capacity needs and to benefit from improved efficiencies in new servers, such as power consumption and smaller footprint.
"Computers are important, independent of the economy cycle," Otellini said. "The difference now is that corporations are buying in addition to consumers. Computers are fundamental to people's lives these days."
Otellini said Intel intends to provide more details about its forthcoming "Sandy Bridge" architecture at its developer conference in September. He said "Sandy Bridge" microprocessors should ship before the end of the year.
Server Market SplitsvilleJust because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.