Intel's revenue and profit both dropped last quarter as people held off on buying new PCs ahead of the Windows 10 launch later this year.
Revenue from Intel's Client Computing Group, which sells processors for desktops, laptops and smartphones, fell 14 percent from this time last year to $7.5 billion, the chip maker said Wednesday.
Its Data Center Group, which makes the Xeon server processors, performed better, but not well enough to offset the ongoing slump in the PC industry.
Intel's total revenue for the quarter ended June 27 was $13.2 billion, down 5 percent from a year earlier. Net income was $2.7 billion, down 3 percent.
Its revenue and profit both beat the modest expectations of Wall Street analysts, according to Thomson Reuters.
Revenue from the Data Center Group was up 10 percent year-over-year to $3.9 billion, Intel said. Its sales into the Internet of Things market also expanded, to $559 million.
But Intel gets most of its revenue from chips used in PCs, and that market isn't doing well. Worldwide sales were down 12 percent last quarter, IDC said recently, in part because buyers are holding out for Windows 10.
CEO Brian Krzanich expects the Windows 10 launch, along with Intel's upcoming Skylake processor, to generate "excitement" in the PC market in the second half of the year, a company statement said.
It's unclear how big the Windows 10 effect will be, however. That's because Microsoft is providing the OS as a free upgrade to existing users, giving people less reason to go out and buy a new PC.
The slow PC market is also hurting Intel's smaller rival AMD, which warned last week that revenue this quarter would be lower than previously forecast. AMD is due to report its results Thursday.
Both Intel and AMD have struggled to profit from smartphones and tablets, the fastest growing parts of the computing market.
Intel changed how it reports its financial results at the start of the year, making it harder to see how its smartphone business is doing. It used to break those numbers out separately, but it now rolls them in with laptop and desktop sales.