In the midst of one of the diciest global economies in generations, with whole countries going bust, Intel has delivered the single best quarter in its 42-year history.

The news sparked the tech sector and an erratic Wall Street in general.

The company made 51 cents a share in Q2 – when the Street was only looking for 43 cents – on revenues up 34% year-over-year to $10.8 billion – when analysts expected $10.25 billion.

Intel itself only expected to do $10.6 billion at best. Its revenues are usually down 2% in Q2 instead they were up 5% sequentially.

Net income worked out to $2.9 billion, with an outstanding 67% gross margin, three ticks higher than the 64% Intel was guiding to. Its operating income was $4 billion. All geographies, even the lackluster EMEA, were up compared to Intel’s usual seasonal expectations, especially their commercial business.

Dampening concerns raised last quarter that the consumer’s strength was giving out – consumers after all represent 70% of its sales – Intel said straightaway that it was seeing “strong demand from corporate customers for our most advanced microprocessors.” It called the PC and server segments “healthy” and expects demand “will continue to increase for the foreseeable future.”

CEO Paul Otellini lays part of Intel’s performance to the cloud build-out and its appetite for Xeons, which he described as “growing like a hose,” up 170% year-over-year.

He also thinks that maybe, just maybe the great, long-awaited corporate refresh cycle has started, egged on by a new sensitivity to the electrical bill. At least corporate and small business spending is starting to return, in part because of demand for Windows 7.

PC revenues were up 2% in a quarter that’s not seasonally strong for PCs, with mobile chip revenue unsurprisingly at a record. Unit growth was up 20%.

Ditto server revenues, up 13% sequentially, a big difference from a year ago when “servers were pretty dark,” as Otellini said. The company is now seeing richer server configurations.

Atom did $413 million in processor and chipset revenues in the quarter, up 16% sequentially. Intel has sold 75 million Atoms since it started producing the little widgets and Otellini expects 40 million netbooks based on the dingus to be sold this year.

Like netbooks, Otellini expects tablets to be “additive,” not cannibals. He’s expecting at least 30 different Atom-based tablets to be coming out. Next year, Atom will turn up in Google TVs, set-top boxes and DVDs.

Intel said ASPs in general were up slightly sequentially.

Intel pretty much brushed aside any concerns about inventory. Inventory is lean in the channel and Intel has built up certain stockpiles in anticipation of a seasonally stronger second half, it said. The company is building more 32nm chips than it planned six months ago. It even expects 45nm to be around longer than it forecast simply because the market is bigger than its planners thought.

Intel is anticipating revenues of $11.6 billion this quarter plus or minus $400 million and thinks it can squeeze out another 67% gross margin plus or minus a couple of percentage points.

It jacked up its margin expectations for the full year to 66% give or take, up from 64%. Feeling comfortable it said it would spend more on R&D and capex. The numbers are higher than Wall Street was projecting. It thought Intel might clear $10.9 billion in Q3.

Otellini said there is more demand than expected for the new Sandy Bridge microarchitecture chips, which started sampling last quarter and is expected to start appearing in Q4. Intel is anticipating a faster ramp.