Intel Corp's quarterly results and revenue forecast trumped Wall Street's expectations but its stock gave ground as investors continued to question the strength of the PC market.

Doubts about high U.S. unemployment, the risk of a European financial crisis, climbing inventories and sluggish PC sales had clouded the second-half outlook for Intel and other chip makers like Advanced Micro Devices.

But the company, which dominates the PC microchip industry but is struggling in a fast-expanding mobile market, forecast current-quarter revenue of about $14 billion, give or take $500 million.

When we look across the broader worldwide supply chain for PCs and servers, what we see are inventory levels that are lean out there. People are managing things lean, they're prudent, Intel Chief Financial Officer Stacy Smith told Reuters.

Investors eyeing slow economies and red-hot sales of Apple's iPad 2 in recent months have insisted Intel's outlook for PC growth is overly optimistic. Analysts have warned that Intel at some point may be forced to trim its estimate and that sentiment weighed on Intel's shares following the report.

The primary question investors are going to ask now is where Intel is seeing the fundamental strength in the PC market, said Evercore Partners analyst Patrick Wang. It's hard to have any confidence in how they are going to deliver 7 percent growth sequentially.

Smith said he would give more details about Intel's expectations for PC sales during the quarterly earnings call with analysts.

Gains in the second quarter were driven by the PC group, Intel's largest segment, and the data center group, which has been expanding quickly in part because of cloud computing.

The Intel Atom division saw revenue slide 15 percent to $352 million.

Intel's upbeat results followed positive quarterly earnings from Apple Inc and International Business Machines Corp earlier this week.

Analysts on average had expected Intel's revenue to rise to $13.5 billion in the current quarter, according to Thomson Reuters I/B/E/S, less than normal growth for this time of year.

Revenue in the June quarter was $13.1 billion, up 22 percent over the year-ago period and above the $12.8 billion expected by analysts, according to Thomson Reuters I/B/E/S.

Non-GAAP net income in the quarter was $3.2 billion, up 10 percent. Non-GAAP earnings per share were 59 cents, beating expectations of 51 cents.

Shares of Intel dipped 1.52 percent to $22.64 in extended trade after closing down 0.3 percent.

(Reporting by Noel Randewich; Editing by Richard Chang)

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