Intel (NASDAQ:INTC) reported results that beat expectations but were not strong enough to get the company's top or bottom line growing again. Growth in data-center revenue was the highlight at 11%, but there were other reasons to be optimistic.

The end of Windows XP is helping to support growth in corporate PC demand. The Grantley server platform could be a catalyst in the next 12 months. But yet another opportunity exists if Intel can leverage its scale and act as a foundry for other chip designers.

Intel outsourcing its best practices
Altera (NASDAQ: ALTR) struck a deal with Intel a year ago to act as the foundry for its 14nm field-programmable gate arrays, or FPGAs. Altera's primary competitor, Xilinx, partners with TSMC for production, making the partnership between the two companies mutually beneficial. Altera gets to leverage Intel's low transistor cost, and Intel gets to diversify its top line away from PCs.

The timing of the Windows XP upgrade cycle is fortunate for Intel, as it seems to be helping reduce the pressure to show top-line growth as the foundry business gains scale and Grantley is developed. This seems to be happening, since Intel recently announced that the deal with Altera would be expanding to combine separate components, including processors, memory, and programmable chips, into custom devices to reduce manufacturing costs while improving performance.

XP upgrades weren't enough to grow the PC business
The benefit from Windows XP upgrades will likely only last through the end of the year, and it wasn't strong enough to spur PC unit growth to be positive. Year over year, volumes fell 8%. It's true that many organizations are behind the curve in migrating away from the platform, but it seems unlikely that the upgrade benefit will extend beyond a single budget cycle for most companies. Planned upgrades may come late, but they happen as quickly as possible.

Grantley may prove to be a catalyst after Q3
Intel is expected to ship the next version of its workstation platform in the third quarter. The release of Grantley extends the 600-series Xeon-based processors and has the potential to fuel demand for computing power within ever-growing data centers.

Key financial highlights
Revenue of $12.76 billion was slightly below consensus of $12.81 billion, despite growing by 1.5%, year over year. Earnings of $0.38 beat consensus of $0.37, but that was down two pennies from the year ago. Revenue guidance remained the same for the second quarter and the full year 2014, but the gross margin was guided up to 61%-65% for 2Q and 59%-63% for the full year.

Sell-side reaction
After popping up to a two-year high of $27.85 in the after hours, the stock sold off into negative territory the following morning in the pre-market. The overall reaction of sell-side analysts was mixed, with some price targets increasing and one downgrade to a neutral rating. The negative concerns seem to be focused on when the gross margin will peak. There were one or two analysts indicating that it could be as soon as next quarter. It seems that the easiest way for Intel to prove them wrong is to execute on the foundry business through Altera.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.