Updated from 4:54 p.m. EST

SAN FRANCISCO --

Nvidia

(NVDA) - Get Report

more than doubled its bottom line in the third quarter, as sales of notebook graphics chips continue to catch fire.

And the company raised its outlook for the current quarter above Wall Street's expectations, sending its shares up 8.1%, or $2.76, to $36.60 in extended trading Thursday.

The Santa Clara, Calif., company rang up $1.12 billion in sales in the three months ended October 28, a 19% sequential increase that crushed the company's own guidance of 5% to 7% growth as well as Wall Street's expectation of $1.01 billion.

The booming demand for graphics processors appears to have surprised Nvidia, which had cautioned that business might begin to cool in the third quarter.

"Our concerns at the beginning of the quarter as to the sustainability of strength we saw in Q2 never manifested," Chief Financial Officer Marvin Burkett told investors in a post-earnings conference call.

And Burkett said the company was largely able to overcome manufacturing limitations during the third quarter, although he noted that Nvidia is still unable to produce enough of certain types of chips to meet demand.

Nvidia said sales of its graphics chips for notebook PCs surged 120% year-over-year, while desktop graphics increased 33%.

Nvidia earned $235 million, or 38 cents a share, vs. $106.5 million, or 27 cents a share at this time last year.

Excluding stock option compensation expenses and the associated tax impact, Nvidia said it earned 44 cents a share. On that basis, analysts were expecting EPS of 37 cents according to Thomson Financial.

Nvidia is benefitting from its recent introduction of new products as well as solid worldwide demand for the PCs that use its graphics chips. Unit shipments of PCs increased more than 15% in the third quarter, according to industry research firm IDC.

Last month,

Advanced Micro Devices

(AMD) - Get Report

reported strong results in its graphics chip business, while microprocessor maker

Intel

(INTC) - Get Report

also benefitted from the healthy PC environment.

Nvidia noted that royalties from

Sony's

(SNE) - Get Report

PlayStation 3 game console, which uses Nvidia technology, doubled compared to the second quarter.

The increase in royalty revenue helped Nvidia's gross profit margin, which increased to 46.2% vs. 45.3% in the second quarter.

Looking ahead, Nvidia said sales in the current quarter will increase between 5% and 7% sequentially, suggesting a range of $1.17 billion to $1.19 billion.

Analysts polled by Thomson Financial were looking for $1.06 billion with EPS of 39 cents.