Intel Corp. (NASDAQ: INTC ) today reported second quarter results that surpassed Wall Street's already high expectations.

Net income increased to $1.28 billion, or 22 cents a share, from $885 million, or 15 cents, a year earlier while revenue advanced 8.4 percent to $8.68 billion, the Santa Clara, Calif.-based company said in a press release. Analysts had expected the company to earn 19 cents on revenue of $8,54 billion. Shares of the world's largest chipmaker at first rose in after hours but later sold off because of concerns about the gross margins.

Intel said gross margins were 46.9 percent, below the 48 percent it had targetted. That is a key metric that investors watch, so that's why the shares are off about 4 percent. Maybe they will rebound after this evenings earnings conference call.

Nonetheless, investors expect better things to come as Intel continues to gain market share at the expense of Advanced Micro Devices Inc. (NASDAQ: AMD) and benefits from rising IT spending outside the U.S.

"Revenue is going to ramp up dramatically in the second half of the year,'' said Graham Tanaka, president of Tanaka Capital Management in New York, in an interview with Bloomberg News. ``Investors are seeing in the end market that there is a firming in demand and that they're gaining market share.''

The company also gave bullish guidance. It sees third quarter revenue of between $9 billion and $9.6 billion with gross margins of about 52 percent. Analysts had expected revenue of $9.36 billion, according to Thomson Financial.