Advanced Micro Devices forecast first-quarter revenue below analysts' estimates, due to lower demand for its graphic chips used in consoles and an economic slowdown in China.
Shares of the company, which is in the process of selling some of its assets to cut costs, fell 7.7 percent to $1.80 in extended trading.
AMD has been shifting to gaming consoles and low-power servers, but progress has lagged Wall Street expectations due to intense competition from Intel Corp and Nvidia Corp.
The company said a cautious macro environment in China would affect revenue in the first quarter.
China accounted for 42.2 percent of AMD's revenue in 2014.
Intel Corp has also warned of lower demand in China for the first quarter.
AMD forecast revenue for its first quarter to decrease 14 percent, plus or minus 3 percent, from the preceding quarter. This represents revenue of $799.2-$848.6 million, below analysts' average estimate of $898.5 million, according to Thomson Reuters I/B/E/S.
The company's net loss narrowed to $102 million, or 13 cents per share, in the fourth quarter ended Dec. 26, from $364 million, or 47 cents per share, a year earlier.
Excluding items, the company lost 10 cents per share, in line with the average analysts' estimate.
Revenue fell 22.7 percent to $958 million but still came above analysts' expectation of $954.7 million.
Up to Tuesday's close, AMD's shares had fallen 13 percent in the past 12 months.
(Reporting by Kshitiz Goliya and Lehar Maan in Bengaluru; Editing by Don Sebastian)