Advanced Micro Devices has reported a 42% increase in revenue in the fourth quarter, driven by higher sales for its microprocessors and graphics chips.

AMD reported that for the quarter ended Dec. 26, revenue was $1.65 billion, compared to $1.16 billion the same period a year ago. AMD lost 5 cents a share, excluding $1.25 billion paid by Intel in settling AMD's antitrust lawsuit.

AMD beat Wall Street estimates of a loss of 18 cents a share on revenue of $1.49 billion, according to an analyst survey by Thomson Reuters. Nevertheless, AMD shares were down about 4% in after-hours trading Thursday.

AMD's revenue growth was primarily driven by stronger-than-expected sales to computer makers preparing for the holiday shopping season, increased enterprise spending on AMD-based servers and strong demand for the company's Radeon 5000 series graphics chips, which are compatible with Microsoft's latest graphics technology, DirectX 11, which shipped in Windows 7 in October.

AMD, like its rival Intel, benefited from the recovery in the PC market from the economic recession that hammered the industry in the first half of the year. Intel reported this month that net income in the fourth quarter soared 875% from a year ago to $2.3 billion on a 28% rise in revenue to $10.6 billion. Intel also beat analyst expectations.

Helping both companies was a 15.2% increase in global PC shipments in the fourth quarter, according to IDC. Most of the increase in PC sales was due to consumers buying low-priced PCs, which accounts for a large portion of AMD sales.

Dirk Meyer, president and chief executive of AMD, told financial analysts during a teleconference that the company expected to benefit from a PC market that AMD believes will increase by 10% or 11% this year over 2009. "We're sticking to feeling pretty positive on the prospects of unit growth next year," he said.

While AMD shows strength in inexpensive computers sold to small and medium-sized businesses, the company believes it has a chance to sell more to large corporations, if businesses start spending again. Last year, corporate spending on PCs dried up because of the recession, while consumer spending increased.

"To the extent that enterprise spending takes off, we'll bleed into there," Meyer said.

AMD's forecast for the first quarter of this year is for revenue to be down seasonally. The average Wall Street analyst estimate is for revenue of $1.39 billion.

The current quarter will be the first in which AMD will no longer provide consolidated results for itself and GlobalFoundries. The latter company is the result of AMD spinning off its manufacturing operations. GlobalFoundries is a joint venture of AMD and Advanced Technology Investment Co., formed by the Abu Dhabi government.