Updated from Aug. 11

Nvidia

(NVDA) - Get Report

on Thursday reported surging second-quarter profit, despite missing Wall Street's revenue expectations.

Ignoring the revenue miss, investors instead seemed to focus on an earnings beat of 7 cents a share, boosting the stock nearly 5% Friday.

The graphics-chip maker earned $74.8 million, or 41 cents a share, in the quarter ended July 31. That was up from the year-ago period, when the company earned just $5.1 million, or 3 cents a share.

Sales at the company rose 26% year over year to $574.8 million.

Although that top-line result wasn't good enough for the Street, the bottom line did exceed analysts' forecasts.

Analysts polled by Thomson First Call were expecting the company to earn 34 cents a share on sales of $585.36 million. In its last

quarterly report, company representatives declined to give specific guidance for the just-completed period but did say that they expected sales to be "flat to slightly up" from the $583.5 million the company recorded in the first quarter.

Nvidia didn't give specific guidance for the coming quarter, but did sketch out its expectations. The company expects sales again to be "flat to slightly up" sequentially from the second quarter, CFO Marvin Burkett said on a conference call.

The company expects to post gross margins of 37% to 38% on sales, a 5% to 10% sequential jump in operating expenses and a tax rate of 15% to 16%, Burkett said.

Assuming that the company's share count grows modestly and its interest income remains about the same, Nvidia's outlook implies an earnings range of 31 cents to 39 cents a share.

Wall Street has predicted that the company will earn 33 cents a share on sales of $593.6 million in the current quarter. In the third quarter last year, Nvidia earned $25.9 million, or 15 cents a share, on $515.6 million in sales.

Nvidia's bottom line in the second quarter benefited from burgeoning gross profit margins, which came in at 37.84%, up from 35.99% in the first quarter and 30.71% in the year-ago period.

The jump in gross margin was the result, in part, of a shift in the mix of the company's sales. During the quarter, the company's sales of lower-margin memory products declined from the first quarter.

Meanwhile, the company began shipping its high-end -- and high-margin -- GeForce 7800 chip during the quarter.

Another factor was the company's focus on trying to boost margin, Nvidia representatives said on the call.

"We're on track to getting our gross margins up to their historic levels," said CEO Jen-Hsun Huang.

But cost controls also helped increase the company's bottom line. Despite the strong sales gains, Nvidia's operating expenses rose less than 1% year over year.

And the company also saw a reduction in its tax rate, further benefiting its bottom line. The tax rate fell to just 12.2% in the quarter from 20% in the previous quarter and year-ago period.

The decline had to do with the growth of the company's international business, which is subject to lower tax rates than its domestic business, Burkett said.