Editor’s note: Stephen Belanger is a research analyst with Technology Business Research. He offers insight into Intel’s (Nasdaq: INTC) latest earnings report which was released Thursday.

HAMPTON, N.H. – In 4Q13, Intel achieved its second consecutive quarter of year-to-year revenue growth as revenue increased 2.6% from 4Q12 to $13.8 billion.

Stabilization in the global PC market led to record shipments of the firm’s i5 and I7 core processors and desktop revenue growth of 11% year-to-year, driving flat overall PC Client Group revenue over the same period.

Additionally, demand from cloud service providers for the server systems needed to deliver cloud services led to Data Center Group revenue gains of 8% year-to-year.

Despite this, DCG platform volumes increased by only 1% year-to-year, which TBR believes was caused by higher than expected inventory from 3Q13, as well as the U.S. government shutdown in the quarter.

In 1Q14, Intel forecasts revenue growth of 1.7% year-to-year to $12.8 billion, as strong data center demand in areas such as cloud, high performance computing, storage and networking continue to slightly outweigh challenging PC market conditions.

Upcoming Tablet and Smartphone Systems on a Chip (SoC), Will Support Mobile Device Share Gains

Intel’s new Atom chips are being increasingly used by PC OEMs, particularly in the sub-$400 tablet and convertible device markets, which was a strong contributor to other Intel architecture revenue growth of 9% year-to-year. Additionally, Intel continues to expand its network of smartphone partners with newer entrants such as Asus, which TBR believes is helping drive sales volumes through highly aggressive pricing strategies.

In 2H13, Intel launched the Bay Trail and Haswell processor families, helping the firm gain traction in the tablet and mobile device markets where TBR believes Intel has traditionally lagged ARM-based competition. Intel’s new Bay Trail processors will enable OEMs such as Dell, HP and Asus to offer aggressively priced Windows tablets with strong performance and battery life. 7-inch tablets are expected to be priced between $99 and $129, 7- to 8-inch tablets will be priced between $149 and $199 and 8- to 10-inch tablets will start at $199.

Additionally, TBR believes Intel leverages Bay Trail to differentiate from competing chip vendors by enabling the full-featured Windows operating system on tablet devices, which ARM-based competitors are not able to contend with.

In 4Q13, Intel announced the roadmap for several new mobile-centric systems on a chip (SoCs), including the Merrifield 22nm processors, which will be released in 1Q14 and target newOEM smartphones. In 2H14, Intel will launch its next generation 14 nm tablet processors as the firm strives towards its goal of placing its chips in over 40 million tablets during 2014.

Intel’s upcoming tablet processors, including the “Cherry Trail” and “Willow Trail” SoCs, will support both the Windows and Android operating systems. For example, users of the Asus Transformer Book Duet, which was announced in January, can switch between Windows 8.1 and Android 4.2.2 by pushing the “Instant Switch” button on the device.

TBR believes this is will help Intel differentiate through a familiar touch-based ecosystem of Google Play apps, as well as the functionality and productivity of a Windows-based device. These chips will help Intel capture demand for flexible devices that are being increasingly used for both work and personal reasons by customers.

Innovation, Expansion of Intel’s Data Center Portfolio Helps

During 2014, Intel continued to dominate in the global data center chip market. TBR believes the firm’s ability to optimize its solutions for specific workloads including CPU and input/output (I/O) intensive workloads support Intel’s differentiation. Additionally, TBR believes Intel’s expansive product portfolio, which includes over 100 processors at any given time, is a core strength for the firm.

While enterprise IT spending remained challenged, Intel’s data center revenue was driven by demand for technologies needed to support high performance computing (HPC), cloud, and telecommunications workloads. In 4Q13, Intel reported year-to-year revenue gains of 35%, 24% and 18% in its cloud, storage and HPC segments, respectively.

In 4Q13, Intel launched the 22nm Xeon E5-2400 v2 processor family for servers and workstations, which utilizes the Ivy Bridge architecture and is the successor to the existing E5-2600 product line that incorporated Sandy Bridge technology.

TBR believes Intel will continue to invest heavily in its data center business to expand beyond traditional servers, storage, networking and storage in 2014. TBR believes investments in fabric, silicon photonics and non-volatile memory will position Intel to fulfill evolving data center demand. For example, Intel is integrating Ethernet into its Xeon chips and plans to integrate QLogic HPC fabric-related assets into Xeon and Xeon Phi in 2015 to alleviate the data center bottleneck that is increasingly occurring at customers’ networking layer.

TBR believes these investments will enable Intel to grow its data center business single-digits during 2014, despite recent stagnation in the enterprise and public sectors.