Advanced Micro Devices Inc.’s stock jumped by almost 9 percent in after-hours trading today after the chipmaker posted fourth-quarter results that showed surprising growth in key markets.

The veteran semiconductor firm reported earnings before certain costs such as stock compensation of 8 cents per share on revenue of $1.42 billion, up 6 percent from a year ago.

That was more or less in line with analysts’ expectations. Wall Street had also forecast earnings of 8 cents per share, though it was hoping for slightly higher revenue of $1.44 billion.

The company’s stock had taken a big hit earlier in the day before it posted results, and it wasn’t helped when it issued somewhat disappointing guidance for the first quarter of 2019. However, the overall fourth-quarter numbers masked some strong growth in key segments such as its data center and personal computer businesses, which may have contributed to its shareholders’ optimism.

For the second quarter, AMD said it’s expecting revenue of about $1.25 billion, which is some way off the $1.47 billion that Wall Street was hoping for.

AMD blamed the shortfall in its second-quarter earnings projection on “continued softness in its graphics channel and seasonality across the business.” It also cited an expected drop in blockchain-related graphics processing unit revenue and lower memory sales.

But AMD did at least record its most profitable year since 2011. Analyst Patrick Moorhead of Moor Insights & Strategy said that’s a “big deal” because it allows the company to plow more money into its future designs and invest in growth, which he said was “a sharp contrast from prior years.”

The company is already reliant on its newest products to drive growth, the analyst pointed out.

“AMD said that 65 percent of its fourth-quarter sales were from new products like Ryzen, Epyc and Radeon data center GPUs,” Moorhead said. “It’s a good sign as those products are much more competitive and much more profitable.”

The company also had good news in its key data center business segment, which delivered record revenue in 2018 driven mostly by increased sales of chips to public cloud providers such as Amazon Web Services Inc. and Microsoft Corp.

“The data center revenue engine is finally starting to kick into gear,” Moorhead said. “AMD said that data center revenue for CPUs and GPUs accounted for ‘mid-teens’ percent of its overall revenue in the quarter. As we have seen from Intel’s quarterly results over the years, the data center business is lumpy and hard to pin down quarter to quarter.”

AMD also said that it’s expecting to see solid growth over the next year thanks to what Chief Executive Officer Lisa Su said was a “competitive product portfolio.” That portfolio includes its new seven-nanometer Ryzen desktop processors, which AMD is expecting big things from when they ship later this year. The company said it’s hoping for a 50 percent boost in sales of PCs powered by Ryzen chips in 2019 compared with last year.

With this in mind, Su said she’s expecting 2019 sales to grow in the “high single-digit percentage” range. Wall Street had earlier forecast 2019 sales of $6.88 billion, which would amount to year-over-year revenue growth of just 6 percent.

“No longer are we asking if AMD will survive or if AMD will be back,” Moorhead said. “AMD has been back for a while and now it needs to prove it has staying power.”

Image: Louis/Flickr