Chip behemoth Intel (INTC) impressed Wall Street on Tuesday by logging a lighter-than-expected 5% dip in first-quarter earnings as rising data center and Internet of things revenue helped offset sluggish PC demand.

Shares of the world’s largest chip maker rose 2% on the earnings beat and in-line revenue.

The company said it earned $1.9 billion, or 38 cents a share, last quarter, compared with $2 billion, or 40 cents a share, a year earlier. Analysts had expected earnings of 37 cents a share.

Revenue inched up 1% to $12.8 billion, matching the Street’s view. Gross margins ticked up to 59.7% from 56.2%.

“In the first quarter we saw solid growth in the data center, signs of improvement in the PC business, and we shipped 5 million tablet processors, making strong progress on our goal of 40 million tablets for 2014," Intel CEO Brian Krzanich said in a statement.

Digging into Intel’s results, the company logged a 1% dip in PC sales to $7.9 billion amid continued headwinds in that market.

However, Intel’s data center group enjoyed an 11% jump in revenue to $3.1 billion, while the newly-disclosed Internet of Things group logged a 32% leap in revenue to $482 million.

Intel’s mobile and communications division suffered a 61% tumble in sales to $156 million.

Looking ahead, Intel projected second-quarter sales of $13 billion, plus or minus $500 million. That forecast is largely in line with expectations on Wall Street for $12.96 billion in revenue. Gross margins are seen hitting 63%, plus or minus a couple of percentage points.

Intel said it continues to expect 2014 revenue will be flat when compared with the year before. Full-year capital spending is also still seen at $11 billion, plus or minus $500 million.

Shares of Santa Clara, Calif.-based Intel advanced 2.43% to $27.37 in extended trading on Tuesday, putting them on pace to extend their 2014 gain of 2%.

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