Advanced Micro Devices reported financial results that beat Wall Street earnings targets thanks to strong sales of game console chips.

The chip maker reported a non-GAAP net profit of 2 cents a share on revenue of $1.4 billion, compared with expectations from analysts of break-even earnings and revenue of $1.34 billion. Revenue was up 28 percent from a year ago, and earnings were down dramatically from a year ago, dropping from $45 million last year to $12 million this year.

AMD shares are up 3.25 percent to $3.80 a share in after-hours trading.

PlayStation 4

Above: PlayStation 4

AMD had warned last quarter that first-quarter sales would be down compared to the fourth quarter due in part to seasonal patterns. The Sunnyvale, Calif.-based AMD is a leading indicator for both PC sales and video game console sales as the second-largest maker of computer microprocessors.

After the past four earnings reports, AMD’s stock price tanked in after-hours trading. That tends to happen whether or not AMD hits its targets, as investors trade on expectations. And in the past couple of years, AMD has had mixed results as the market for PCs weakens while the opportunity in game consoles grows. For the past two quarters, AMD beat expectations, but investors had hoped for more since AMD has chips in all of the major video game consoles.

Last quarter, AMD reported financial results that met earnings estimates and slightly beat Wall Street’s expectations for revenues for the fourth quarter ended Dec. 31.

In the quarter, AMD shipped large volumes of chips for video game consoles that sold big numbers during the holidays: the Sony PlayStation 4 and the Microsoft Xbox One. Sony said it has shipped 7 million PS4s to date.

“AMD continued our momentum by building on the solid foundation we set in the second half of 2013, further transforming the company,” said Rory Read, AMD’s president and CEO, in a statement. “Backed by our powerful x86 processor cores and hands-down best graphics experiences, we achieved 28 percent revenue growth from the year-ago quarter. We are well positioned to continue to grow profitably as we diversify our business and enable our customers to drive change and win.”

AMD is increasingly focused on areas where it doesn’t directly compete with chip giant Intel, such as semi-custom chips for consoles and other applications. AMD’s console monopoly could provide it with more steady revenues as it tries to compete against Intel in a variety of areas. AMD has also put increased focus into microservers and is creating chips based on the ARM low-power design architecture.

Still, AMD is dependent on PCs, which have struggled. It gets about 80 percent of its revenue from the PC industry.

Earlier this year, AMD announced its code-named Kaveri processors, which are aimed at games and other high-performance applications. The Kaveri chip has 2.4 billion transistors, and 47 percent of them are aimed at producing high-end graphics. The chip is one in a series of accelerated processing units (APUs), which combine a central processing unit (CPU) and graphics processing unit (GPU) on the same chip. AMD also says it has the world’s fastest graphics card on the market for gamers.

The Kaveri chips, known as the A-Series APUs, will have four CPU cores, or brains, and eight GPU cores on one chip. The chips are also the first to use a new approach to computing dubbed the Heterogeneous System Architecture (HSA), which makes it easier to get around bottlenecks inside a PC and speed the whole system up.

AMD said its gross profit margin was 35 percent in the first quarter. It has $982 million in cash. The company said microprocessor average selling prices were flat compared to the previous quarter and they were down compared to a year ago.

For the second quarter, AMD expects revenue to increase 3 percent.

“It’s good to see some consistency at AMD,” said Patrick Moorhead, analyst at Moor Insights & Strategy. “Revenue was up big-time and they are nearly profitable. While PC revenue still declined, it appears that the multi-year dip has bottomed out, and their discrete grapihics business did really well on the back of the R7 and R9 (graphics chips). All this has to help them out for the remainder of 2014.”

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