NEW YORK (CNN/Money) - Intel Corp. reported second-quarter profits doubled from a year ago on Tuesday, narrowly beating analysts' expectations.

The world's biggest semiconductor manufacturer reported net income of $896 million, or 14 cents a share, up from $446 million, or 7 cents a share, a year earlier. According to First Call, analysts had been expecting earnings of 13 cents a share.

The company also reported better-than-expected sales of $6.8 billion, up 7.9 percent from a year ago. Analysts were forecasting revenue of $6.7 billion for the quarter.

Shares of Intel (INTC: Research, Estimates) gained nearly 7 percent in after-hours trading to $25.70, according to Island ECN, after edging up 8 cents in regular trading to $24.10. The stock is up 55 percent this year.

In addition to beating analysts' expectations, Intel also announced better-than-anticipated sales guidance for the third quarter. The company said that sales would be in range of $6.9 billion to $7.5 billion. The midpoint of this range -- $7.2 billion -- is higher than Wall Street's consensus estimate of $7.1 billion.

Intel also said that gross margins for the third quarter and full year should be about 54 percent, up from the company's earlier projections of 51 percent. Gross margins, which measure how profitable a company is after subtracting its cost of sales, is a key gauge of performance in the semiconductor industry. Gross margins for the second quarter came in at 50.9 percent.

The company does not provide earnings-per-share targets. Analysts are expecting Intel to earn 16 cents a share in the third quarter, but that estimate is likely to rise due to the strong second-quarter performance and positive sales outlook.

Intel said that it saw good demand for products in its so-called architecture businesses, which includes sales of chips and motherboards for personal computers, servers and laptops.

It also said that average selling prices for its microprocessors were flat from the first quarter of this year, a positive sign since there were some concerns that a continued pricing war with rival Advanced Micro Devices would lead to lower average selling prices.

Fund managers said that the news looked positive for Intel but were skeptical about whether Intel's good fortune was a sign of broader demand for technology.

"What Intel's results say is that there are elements of technology that are healthy, but nothing is growing explosively," said Barry Randall, manager of the First American Technology fund.

In fact, Intel's good news was tempered by a sales and earnings warning from semiconductor and cell phone manufacturer Motorola as well as yet another bleak forecast by struggling telecom equipment company Lucent, which told Wall Street a mere week before its latest earnings report that it now expects a wider-than-projected quarterly loss.

"A tech recovery is possible but limited to certain sectors," said Randall. "Telecom dysfunctionality continues in earnest." To that end, Intel President and Chief Operating Officer Paul Otellini noted during a conference call that Intel's communications business remained soft.

Alex Vallecillo, portfolio manager with National City Investment Management, which subadvises the Armada family of mutual funds, said it appears that Intel's strong quarter may be more due to its ability to keep the prices of its chips steady as opposed to being a harbinger of an imminent recovery.

"I'm not ready to say that Intel's results indicate a better environment for all chip companies," said Vallecillo.

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And in another possible sign that a recovery is still far from certain, Intel reaffirmed its cautious capital spending plans of $3.5 billion to $3.9 billion for 2003, down from $4.7 billion in capital expenditures last year.

Although Intel Chief Financial Officer Andy Bryant said that corporate spending on tech during the second half of the year is likely to be higher than the first half, he added that this is merely a return to normal tech spending patterns and that Intel was not seeing a "tsunami" of activity from big businesses.

But Intel did increase its research and development budget for the year to $4.2 billion, up from an earlier projection of $4 billion. That's more good news for Intel, but probably not the rest of the sector.

Bryant said that newer products that Intel was developing in the past few years, such as its Centrino wireless chipsets for laptops and Xeon chips for servers, were a big reason behind the better sales and gross margins outlook. So a continued focus on R&D could pay dividends for Intel in the future, and perhaps at the expense of competitors.