Updated from 5:16 p.m. EST
edged past Wall Street estimates in its first complete quarterly earnings report since April.
Shares of Altera were up 1.7%, or 31 cents, to $18.75 in extended trading, adding to gains during Monday's regular trading session.
The San Jose, Calif., maker of programmable chips boosted its third-quarter revenue 17%, year over year in the three months ended Sept. 29, on sales of $341.2 million.
Altera said it earned $87.4 million, or 24 cents a share. Excluding stock-option expenses, Altera said it had EPS of 27 cents.
By that measure, analysts polled by Thomson Financial were looking for EPS of 25 cents on revenue of $338.2 million.
Altera CEO John Daane credited the third-quarter performance to sales of new products, which were up 26% sequentially and 142% from this time last year.
Computer and storage chips posted the strongest growth, with sales rising 27% from the second quarter. Communications chips, which account for the bulk of Altera's revenue, saw sales decline 3% sequentially.
During a postearnings conference call, Altera's management said there was an inventory accumulation of FPGA chips -- programmable chips that account for roughly 70% of revenue -- which put pressure on orders in the third quarter and would contribute to declining revenue in the fourth quarter.
Altera's internal inventory increased 20% sequentially to $93.4 million. The total amount of inventory sitting in Altera's internal warehouses and with distributors increased to 3.8 months, compared with 3.6 months in the second quarter.
Altera's executives said they were comfortable with the inventory situation, which is within the company's targeted range of three months to four months.
Altera's sales guidance for the fourth quarter under way lagged Wall Street expectations. The company said it expected revenue to decline between 2% and 5% sequentially, with decreasing sales in each of its end markets save for the industrial sector where Altera expects revenue to be flat.
Analysts expected Altera's sales to pick up by a couple of percentage points and for the company to add a penny to EPS at 26 cents.
Altera did not provide EPS guidance for the fourth quarter, although it projected a gross-margin range between 65% and 67%. In the third quarter, Altera's gross margin was 67.5%.
Last month, Altera said it would record $47.6 million in charges because of discrepancies it found in certain stock-option grants.
Altera is among more than 100 companies under scrutiny for the practice of backdating stock options.
During Altera's internal probe into the matter, it ceased providing complete financial results and temporarily suspended its stock-buyback program. Altera said Monday that it did not repurchase shares during the third quarter and ended the quarter with $1.6 billion in cash.
Altera closed Monday's regular session up 4%, or 72 cents, at $18.44.