Shares of Intel (NASDAQ:INTC) soared on Friday, Jan. 26, following the release of sensational fourth-quarter results. The semiconductor giant's stock closed 10.5% higher that day, at price levels not seen since the dot-com boom 18 years ago.

Intel's fourth quarter

In the fourth quarter, Intel's adjusted earnings rose 24% year over year to land at $1.08 per diluted share. Top-line sales increased 4% to $17.1 billion. Both results ran way ahead of Wall Street's targets, which called for earnings of $0.87 per share on sales near $16.3 billion.

The strong bottom-line results were obscured from Intel's GAAP results by a $5.4 billion one-time tax charge, as the Trump administration's new tax rules took effect. But these expenses don't figure into non-GAAP metrics, freeing investors to focus on a permanent effective tax rate drop from 20% to 14%.

The PC division delivered $9 billion of fourth-quarter sales, falling 2% year-over-year in the holiday quarter. CFO Bob Swan said that the PC business "continued to execute well in a declining market while the growth of our data-centric businesses shows Intel's transformation is on track."

The company's data-centric operations did indeed put up a stellar performance. Programmable solutions (formerly known as Altera) saw fourth-quarter sales rocketing 35% higher while the Internet of Things group boosted revenues by 21% and data center sales rose 20% higher. The bottom-lines results you see here were the product of strong top-line sales and lowered effective tax rates.

Management also addressed the Spectre and Meltdown security flaws in their earnings call with analysts, insisting that they aren't affecting chip sales in the ongoing first quarter. Nevertheless, Intel's chip architectures are being redesigned to avoid these security threats on a hardware-based level, with the first built-in mitigations appearing later this year. That's good news if you had been worried about Meltdown and Spectre scaring customers away from using Intel's processors, since there are no signs of a significant business impact here.

Dramatic off-kilter angle shot of a data center corridor, decked out in bright green accents.

Image source: Getty Images.

Analysts analyze

Wall Street firms embraced Intel's report with price target boosts galore. Analyst comments focused on strong data center sales, driving Intel's product mix further away from the commodity PC market and into more lucrative territory. Near-term growth drivers include 5G wireless modems, high-performance processors aimed at artificial intelligence systems, and expanded use of programmable chips in data center environments.

Sector rival Advanced Micro Devices (NASDAQ:AMD) followed up with a solid earnings report of its own this week, triggering another round of cheerful analyst notes. Some of the same analysts who celebrated Intel's report also argued that AMD is stealing market share from its larger competitor in both the PC and data center markets.

Analyst firm Rosenblatt called AMD's fourth quarter an "inflection point" in the company's quest for increased market share. Rosenblatt holds a "sell" rating on Intel, calling the company vulnerable in the CPU sector overall.

My Foolish take

I agree that the sands are shifting under the PC market, where Intel seems happy to give up low-margin ground to AMD. But the plucky underdog is more likely carving out a specialized niche for itself, based on processors originally designed to handle digital graphics rather than the intense cryptocurrency and artificial intelligence number crunching they are doing in modern data centers. Meanwhile, Intel's data center group grew its sales by 20% year-over-year to $5.6 billion, adding as much fourth-quarter business in the space of 12 months as AMD's entire Q4 computing and graphics revenues.

It's refreshing to see AMD finally playing the part of a credible competitor, but it's a bit much to call the company a threat to Intel. That's why many analysts can praise both companies in a single breath, cheering AMD's drawn-out turnaround effort without losing sight of Intel's consistent results on a greater scale.

Anders Bylund owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.