Updated from 6:34 p.m. EDT

Advanced Micro Devices ( AMD), the world's second-largest chipmaker, handily beat third-quarter estimates Tuesday.

Strong microprocessor sales helped to boost revenue 23% and earnings nearly 73%.

For the quarter ended Sept. 25, AMD earned $76 million, or 18 cents a share, on sales of $1.52 billion. During the same quarter last year, AMD earned $44 million, or 12 cents a share, on sales of $1.24 billion.

Analysts had expected earnings of 8 cents a share on sales of $1.38 billion, according to Thomson First Call. AMD had said it expected computer-chip sales to "exceed normal seasonal patterns" in the third quarter, but declined to project memory unit results.

"It's clear evidence that this is a much different company than it was two to three years ago," said Sangeeth Peruri, semiconductor analyst for Seligman Technology Group, a division of J & W Seligman & Co., which holds AMD shares. "If the company continues to grow at these levels, the leverage is huge in the model."

Still, it's possible the margins should have been even higher, Peruri said. One factor that could have weighed on them was $66 million in bonuses that AMD paid out during the quarter, up dramatically from $16 million in the previous quarter and $17 million in the same period a year ago.

"I think with the revenue number they came up with, it's possible people were hoping for a larger EPS," Peruri said.

AMD's gross margin was 41%, up from 39% in the previous quarter and above 40% in the third quarter last year. The company has long-term targets of 60% margins, but that takes into consideration the memory group's spinoff.

The Sunnyvale, Calif.-based company recorded an operating profit of $79 million compared with $68 million a year ago and an operating loss of $7 million in the previous quarter.

"This was another record-breaking quarter for AMD's microprocessor business," AMD CFO Robert Rivet said. "Exceptional customer demand for our server, mobile and desktop processors helped drive microprocessor sales growth of 44% compared to the third quarter of 2004, and 26% compared to the second quarter of 2005.

"We established new quarterly records in unit and dollar sales, gross margin and operating income," the CFO said.

AMD said it expects fourth-quarter microprocessor sales to grow between 7% and 13% sequentially, which represents a year-over-year increase of 42% to 50%. The company did not provide guidance for its flash memory business, called Spansion, which it plans to spin off in a public offering.

The company generated record operating income of $209 million and sales of $969 million within its computation products group, which includes PC, server and laptop chips and chipsets.

In the previous quarter, this unit posted a $100 million operating profit on sales of $767 million; a year ago it posted an operating profit of $89 million on $673 million in sales.

The unit's operating margin came in at about 21%, breaking the 20% barrier for the first time ever.

AMD more than doubled its sales to large, global PC makers from a year ago, while record processor sales were the result of a 72% sequential increase in sales of AMD Turion 64 mobile processors.

The company also cited strong sales in such high-growth markets as Russia, India and China.

AMD's memory group lost $50 million on sales of $516 million in the third quarter vs. an operating loss of $90 million on sales of $462 million in the second quarter.

Shares of AMD, which were halted in advance of the earnings announcement, closed up 89 cents, or 3.4%, at $23.29; shares recently edged up 26 cents to $23.55 in after-hours trading.

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