Yesterday evening, chip-giant Intel (NASDAQ:INTC) gave investors a pleasant surprise. Intel boosted its revenue outlook for the second quarter, effectively pre-announcing a beat relative to Street expectations. Revenue should come in around $13.7 billion, give or take $300 million. That's up from the prior guidance range of $13 billion, give or take $500 million. That $700 million boost in the mid-point is well above the $13.1 billion consensus estimate.

Gross margin should also come in better than expected, and Intel is now forecasting revenue growth this year. The company attributed the strength to business PCs, which are seeing healthy demand. That also has implications for Microsoft (NASDAQ:MSFT), as the current enterprise upgrade cycle is directly related to Windows XP's end of support in April. 

This upgrade cycle, while boosting results now, could still prove short term in nature. Upgrade cycles of this magnitude don't come around very often. Additionally, Intel's rally puts its free cash flow valuation multiples at a premium relative to peers, which implies that investors are expecting sustained growth.

In this segment of Tech Teardown, Erin Kennedy discusses Intel's rally with Evan Niu, CFA.

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Erin Kennedy owns shares of Apple. Evan Niu, CFA owns shares of Apple. Evan Niu, CFA has the following options: short January 2015 $280 puts on and long January 2015 $250 puts on The Motley Fool recommends, Apple, and Intel. The Motley Fool owns shares of, Apple, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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