Advanced Micro Devices Inc forecast current-quarter revenue above Wall Street's expectations as it rushes to find new markets to offset its declining core business of PC chips.
Like larger rival Intel Corp, AMD is trying to refocus its business as sales of laptops languish and consumers increasingly depend on smartphones and tablets.
It shares fell nearly 6 percent after the report, erasing sudden gains in the last few minutes of the trading session.
AMD on Thursday reported revenue of $1.09 billion, down from $1.59 billion in the year-ago quarter. It said June-quarter revenue would rise 2 percent, plus or minus 3 percent, compared with the March quarter.
Analysts on average expected first-quarter revenue of $1.046 billion and June-quarter revenue of $1.071 billion, according to Thomson Reuters I/B/E/S.
"In a world of low expectations this is a decent report - a solid beat off of low expectations," said Sanford Bernstein analyst Stacy Rasgon.
When Intel posted its quarterly earnings on Tuesday, it also gave a revenue forecast above expectations, betting on a recovery in PC sales in the second half of the year.
While Intel has deep pockets to fund research on new processors to catch up in tablets and smartphones, AMD faces declining cash flows and a more modest balance sheet.
It is reducing operating expenses and refocusing its chip technology on new markets like communications, microservers, game consoles, digital signs and stripped-down "thin client" computers.
AMD said in a statement it had a net loss of $146 million, or 19 cents a share, in the first quarter, compared with a loss of $590 million, or 80 cents a share, in the same quarter last year.
Its adjusted loss per share was 13 cents. Analysts expected 18 cents.
AMD's stock fell 5.9 percent in extended trade, erasing a sudden spike from negative territory in the last half hour of normal trading that left it up 4.6 percent at $2.51 at close.
(Reporting by Noel Randewich in San Francisco; editing by Phil Berlowitz and Matthew Lewis)