Updated from 6:32 p.m. EST

Take-Two Interactive

(TTWO) - Get Report

gave investors two different things to ponder on Thursday afternoon: The company topped the Street's earnings estimates for its holiday quarter but predicted worse-than-expected results in coming periods.

On balance, investors seemed to focus more on the good news: In after-hours exchanges, the company's stock was up 68 cents, or 1.8%, to $38.10.

In its first quarter, the video-game software publisher earned $55.23 million, or $1.19 a share, on $502.47 million in sales. Those results were up significantly from the year-ago period, when the company earned $31.76 million, or 70 cents a share, on sales of $375.51 million.

They also were far ahead of analysts' forecasts and the company's projections. On average, analysts polled by Thomson First Call were expecting Take-Two to earn $1.09 a share in the quarter on $452.6 million in sales. In December, the company predicted it would earn $1 to $1.10 a share in the quarter on sales ranging from $440 million to $460 million.

On a conference call, company officials attributed the strong results to its flagship

Grand Theft Auto

franchise. Some 57% of revenue in the quarter came from sales of

Grand Theft Auto: San Andreas

. To date, the company has sold 12 million copies of the title.

"Once again, we exceeded expectations with the title," said Cindi Buckwalter, an executive vice president at the company, on the call.

But the company warned that its bottom line will come in far below expectations in its next two quarters. Take-Two said it expects to lose 20 cents a share on sales of $200 million to $210 million in its second quarter. The company expects to earn 5 cents to 15 cents a share in its third quarter on sales ranging from $220 million to $240 million.

Previously, Take-Two had projected that it would lose 10 cents to 20 cents in the second quarter on sales of $170 million to $190 million. The company had not previously given third-quarter guidance.

For its fiscal full year, the company now expects to post a profit of $2.10 to $2.20 a share on sales ranging from $1.3 billion to $1.35 billion.

Analysts had projected that Take-Two would lose 13 cents a share on $182.43 million in sales in its current quarter. In the third quarter, analysts were looking for a profit of 33 cents a share on sales of $262.97 million.

For the full year, analysts are expecting $2.14 a share in earnings on $1.24 billion in sales.

In its second quarter last year, Take-Two lost $14.44 million, or 32 cents a share, on $160.86 million in sales.

The company expects sales of

Grand Theft Auto: San Andreas

to be better than it previously forecast, CFO Karl Winters said, but increased investment expenses will more than make up for that revenue gain. In particular, the company is "rapidly scaling" its new 2K Games division, he said. Plus, the company's previous guidance didn't include overhead from its

recently acquired Visual Concepts and Kush Games studios.

Those investments should start paying off in fiscal 2006, Winters said. For that year, 2K Games should have a robust portfolio of games, he said. Additionally, the company expects to post both top- and bottom-line growth in its next fiscal year, but Winters declined to give specific earnings or revenue projections.

Analysts and investors have worried that the next several years will be choppy in the video-game industry. The industry is expected to make a transition to a new generation of game consoles beginning later this year. During such transitions in the past, software publishers have seen revenue slow or decline and seen costs increase as they prepare titles for the new hardware.

Some analysts, however, believe that the game publishers on the whole will navigate this transition better than in the past. Giving them some hope is the expected popularity of the latest portable game devices,

Nintendo's

DS and

Sony's

(SNE) - Get Report

PSP. Some analysts expect sales of software for the two portable machines to buoy the finances of the game publishers until the next-generation consoles have sufficient user bases.

Along those lines, Take-Two said that it is coming out with a number of new titles for the PSP. The company is developing a new

Grand Theft Auto

title specifically for the device that it expects to release in its third quarter.

The company also plans to release its upcoming

Midnight Club 3: DUB Edition

game on the PSP in April at the same time it releases versions of the title for Sony's PlayStation 2 and for

Microsoft's

(MSFT) - Get Report

Xbox.