AMD 's third quarter results exceeded analysts' predictions. Its profit for the period was $134m (£71m), or 27 cents per share on the $1.33 billion revenue it generated.
Analysts had predicted that AMD's profits would be around the $1.31bn mark, or 24 cents per share.
The results are an improvement over the same period last year when AMD made a profit of $44m, or 18 cents per share, and generated $1.52bn.
AMD's sales increased by 9 per cent compared with the previous quarter, and by 32 per cent compared with the same period last year, said Robert Rivet, AMD's chief financial officer, in a statement.
Its gross margins went down from 56.8 per cent during the second quarter of 2006 to 51.4 per cent during the third. According to AMD, this is due to the high price competitiveness in the processor market and the price drop on processors.
Intel down compared to last year
Intel , on the other hand, recorded a profit of $1.3bn (£689m) which is more than the predictions made by analysts, but a huge drop compared with last year's results.
Intel's revenue during the third quarter of 2006 was $8.7bn, much due to strong sales of the new Core Microarchitecture product for portables and servers. In total, the company made a profit of 22 cents per share, which is up on the predicted 18 cents per share. The revenue, according to a prognosis, was predicted to be around $8.62bn.
The profit marks a drop in net income by 35 per cent, and shows that revenues are down by 12 per cent. During the same period last year, Intel's revenue was $9.96bn, with a profit of 32 cents per share.
The company previously announced that it would miss its annual profit target as a result of the increased competition by AMD. Intel has since let off 10,500 - a tenth - of its staff.
Intel's CEO, Paul Otelini, said that key new launches should make a difference in future profits. The new Core 2 Duo architecture and quad core processors are predicted to increase profits and revenue. During the fourth quarter, Intel expects revenues to come in between $9.1bn and $9.7bn.