NEW YORK -- Intel's earnings fell in the first three months of the year, but revenue grew because of solid demand for tablet processors and its data center services.
Intel Corp. said Tuesday that it earned $1.95 billion, or 38 cents per share, in the January-March quarter. That's down from $2.05 billion, or 40 cents per share, a year earlier.
Revenue grew 1 percent to $12.8 billion from $12.6 billion.
A survey by FactSet says analysts were expecting earnings of 37 cents per share on revenue of $12.8 billion.
Intel has been challenged by a shift in consumer spending away from PCs. Although Intel is the leader in making chips for PCs, it hasn't done as well selling processors for smartphones and tablets. Intel has been working to change that.
Although revenue for the PC business fell, Intel saw signs of improvement. The company also credited solid growth in data centers and said it shipped 5 million tablet processors. CEO Brian Krzanic described that as "strong progress on our goal of 40 million tablets for 2014."
There are signs that the steep PC slump is easing, though it may be a temporary bump from Microsoft's retirement of the Windows XP operating system, which it launched in 2001.
Last week, research firms Gartner and IDC said that although global PC shipments declined in the first three months of the year for the eighth straight quarter, the decline was not as steep as in the last quarter of 2013.
Analysts for both firms pointed to a bump in demand, especially in Japan, stemming from the Windows XP retirement. While users can still run XP, but Microsoft will no longer provide security updates and has urged existing users to upgrade to newer systems.
For the second quarter, Intel is forecasting revenue of $12.5 billion to $13.5 billion. Analysts were expecting $12.9 billion.
Shares of the Santa Clara, Calif., company climbed 75 cents to $27.52 in extended trading after the results came out. The stock had closed at $26.77, up 21 cents and not far from its 52-week high of $27.12.