AMD shares rose as much as 6% in extended trading on Tuesday after the chipmaker indicated its server chip business will grow in the quarters ahead, even as earnings and quarterly guidance failed to meet Wall Street’s expectations.

Here’s how the company did:

  • Earnings: 67 cents per share, adjusted, vs. 68 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $5.57 billion, vs. $5.62 billion as expected by analysts, according to Refinitiv.

Overall, AMD’s revenue grew by 29% year over year in the fiscal third quarter, which ended Sept. 24, according to a statement. Net income fell 93% to $66 million, mainly because of AMD’s $49 billion acquisition in February of Xilinx, a maker of chips called field-programmable gate arrays.

On Oct. 6, AMD issued preliminary results for the fiscal third quarter that lagged guidance it provided in August, because of fewer chip shipments in a weaker PC market than expected. The stock fell almost 14%, its largest decline since March 2020. AMD has been preparing for the PC market to be lackluster in the fiscal fourth quarter, CEO Lisa Su said on a conference call with analysts.

For the full year, AMD said it sees $23.5 billion in revenue, down from the $26.3 billion forecast the company gave in August. Analysts polled by Refinitiv had expected $23.88 billion. The company contracted its adjusted gross margin outlook to 52% from 54% in August.

AMD said its Data Center segment generated $1.61 billion in revenue in the fiscal third quarter, up 45% and slightly below the StreetAccount consensus of $1.64 billion. The unit includes contributions from Xilinx and distributed computing startup Pensando, which AMD bought for $1.9 billion.

The chipmaker has seen healthy demand for shipments of its server chips that carry the code name Genoa. AMD plans to launch Epyc data center chips on Nov. 10.

“We’ve had very good progress at the North American cloud vendors and we continue to believe that although there may be some near-term, let’s call it optimization, of, let’s call it individual footprints and efficiencies at individual cloud vendors, over the medium term,” Su said. “As we go into 2023, we expect growth in that market, particularly customers moving more workloads to AMD, just given the strength of our product portfolio and overall general coming forward.”

Su said cloud revenue more than doubled and increased sequentially, while revenue from server makers targeting big companies was down sequentially. She said AMD has seen enterprise customers taking longer to make decisions and being slightly more conservative on capital expenditures.

The data center business “at least for now, looks decent, and quite a bit better than what’s going on with Intel,” said Stacy Rasgon, senior semiconductor analyst at Bernstein, in an interview on CNBC’s “Closing Bell: Overtime” after AMD announced its results. “There’s a lot of uncertainty about what they were going to say about data center, particularly in the wake of Intel’s report where Intel had called for the market to decline in Q4. This is probably why the stock is up now. The guide itself is quite weak, but it seems likely that it’s isolated to PCs.”

The Gaming segment produced $1.63 billion in revenue. That was up about 14% and in line with the $1.63 billion consensus among analysts surveyed by StreetAccount. The company touted healthy demand for console chips for Microsoft and Sony as the holidays approach.

The Embedded segment that includes some Xilinx sales delivered $1.3 billion, up from $79 million in the year-ago quarter and in line with the $1.3 billion StreetAccount consensus.

AMD’s Client unit, which the chipmaker had warned about in October, generated $1.02 billion in revenue. That was down nearly 40% but in excess of the $1.17 billion StreetAccount consensus. Four days after AMD gave preliminary results, technology industry researcher Gartner said third-quarter PC shipments fell 19.5%, the steepest decline the company has seen since it started following the market in the mid-1990s. During the quarter AMD announced Ryzen 7000 desktop PC chips, and the company pointed to positive reviews of the products.

AMD “worked closely with our customers to reduce downstream inventory,” Su said.

All four of the segments delivered slightly more revenue than AMD had said to expect in its October warning.

“We will continue to invest in our strategic priorities around the data center, embedded and commercial markets, while tightening expenses across the rest of the business,” Su said. The company will control operating expenses and headcount growth, said Devinder Kumar, AMD’s finance chief.

Notwithstanding the after-hours fluctuation, AMD stock has plummeted 58% so far this year, while the S&P 500 is down 19% over the same period.

WATCH: Bernstein’s Stacy Rasgon weighs in on AMD earnings