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Pinch me. AMD is profitable - for the second time in a row - confounding Wall Street, which figured it would lose money in the first quarter despite the strengthening PC economy.

But on Thursday AMD said it earned $257 million or 35 cents a share on revenues of $1.57 billion, a tad better than thought, up 34%. Its operating income was $182 million. Its gross margin went from 43.4% to 47.1%.

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On a non-GAAP basis its net income was $63 million, or nine cents a share, and its non-GAAP operating income was $130 million. The results included a one-time non-cash gain of $325 million from the deconsolidation of GlobalFoundries, its spun-out plants. Last year it lost $416 million, or 66 cents a share on $1.18 billion in revenue.

Its factories are no longer computed in its results, which suggest the spin-out helped.

AMD said its chip sales were up 23% year-over-year but down 5% sequentially because it sold less of them at a slightly better ASP than in Q4 because of the mix. Its operating income from the segment was $146 million, compared with $161 million in Q4 and a loss of $34 million in 1Q09.

Revenue from its graphics segment was up 88% year-over-year but down 3% sequentially, which it attributed to a seasonal decline in royalties received in connection with the sale of game console systems, offset by an increase in GPU revenue and that most from discretes. Operating income from the sector was $47 million, compared with $50 million in Q4 and breakeven last year. GPU ASP increased sequentially and decreased year-over-year.

AMD won't have its so-called Fusion product in shipping products until the first half of next year.

AMD expects revenue to be down seasonally this quarter. It expects to build inventory ahead of a better second half. There was no talk of corporate spending coming back like Intel.

CFO Thomas Seifert figures its gross margin for the whole year will be between 40% and 45%.

CEO Derrick Meyer described AMD's existence the rest of this year as "hand to mouth," he also claims that AMD is in the best competitive position since mid-2006 - at least with respect to server chips.

With the 12-core Magny-Cours chip in its pocket AMD figures to press its advantage and "disproportionately grow the server."

First platforms from its first three OEMs could be out any time now and Meyer claims to be getting "encouraging feedback" from potential users who got an early look at the thing. AMD also hopes to capitalize on what it considers the "disruptive" pricing 2/4 socket Opteron 6000s.