Intel said it now expected to earn between $7.3bn and $7.8bn for the three months to late September, up from an initial forecast of $6.9bn-$7.5bn.

The company said it also expected gross profit margins to be about 56%, up from its previous goal of 54%.

Wall Street investors welcomed the news sending Intel shares up 10% in early trade, although they fell back later to close up 3.8% at $27.39.

Rival chip maker AMD also benefited from Intel's news, and its shares ended the day up 48 cents at $9.91.

Upbeat outlook

Intel is often seen as a bellwether for the technology industry because of its size.

Other chip firms have recently been showing signs of emerging from a slump which has gripped the industry for the past three years, and Intel's news is expected to lift hopes that the worst is over.

Intel's chief financial officer Andy Bryant said shipments of microprocessors were better than expected in every region, but added that demand for communication chips remained weak.

The news from Intel had a knock-on effect on tech stocks in Europe.

In Paris, Franco-Italian chip-maker STMicroelectronics rose more than 4% to 21.50 euros, and Infineon and Philips Electronics also enjoyed healthy gains.