OK, Fools -- Advanced Micro Devices (NYSE:AMD) has reported target-crushing sales and earnings, just as I expected. And AMD shares fell 5% on the news. Feel free to build a position in AMD, now that we’ve got all that out of our way.

You could say that AMD got the price appreciation it deserves on Wednesday, riding the coattails of archrival Intel (NASDAQ:INTC). Today's drop simply snaps the market back to reality again. And I'm serious about the buy-in opportunity here, because I think Mr. Market's counterintuitive reaction to AMD's report is a myopically shortsighted one. In the long term, this stock has a lot of room to run.

AMD reported $1.4 billion of third-quarter revenue, or 18% growth from the second quarter. An $0.18 net loss per share easily trumped last quarter's $0.49 loss per share -- and both the graphics and CPU divisions reported positive operating earnings this time. Average selling prices per microprocessor went up, the manufacturing arm is getting more efficient, and AMD's tight rein on operating expenses has put the company on track for bottom-line profits in our lifetime.

The product pipeline is showing muscle, too: The Radeon HD 5000 line of graphics processors are crushing the best NVIDIA (NASDAQ:NVDA) has to offer, and the six-core Istanbul server chip now makes up one-third of AMD's server sales to the big-iron builders like IBM (NYSE:IBM) and Hewlett-Packard (NYSE:HPQ). Plus, CEO Dirk Meyer expressed confidence that the long-awaited Fusion brain-plus-graphics product will ramp up in the second half of 2010 using the next-generation 32-nanometer manufacturing process.

Outgoing CFO Bob Rivet said that AMD is "operating at a grounded and sustainable business model, the benefits of which will be amplified with the return to normal IT spending in the commercial sector." When Microsoft (NASDAQ:MSFT) releases Windows 7 later this month, there should be a modest rise in chip sales -- but management still set very modest expectations for sales growth.

CEO Dirk Meyer believes that Microsoft's upgrade coupons for today's Vista machines should smooth out the effect of Windows 7 upgrades on system sales, and guides sequential growth to just below the normal 9% level. And this cautious outlook could be the reason behind the price drop. In the words of the market, “Beat the Street all you want, but don't you dare set our short-term expectations too low!”

Meyer's view on that issue echoes the long-term mindset of leaders like Cisco Systems (NASDAQ:CSCO) CEO John Chambers. Meyer plainly stated, "I personally don't see much reason to signal anything stronger than we said. I'd rather, you know, beat our numbers."

Is this the right time to buy AMD? The comments box is waiting below, whether you agree or just want to call me an AMD fanboy. Have at it!

Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. NVIDIA is a Motley Fool Stock Advisor pick. Intel and Microsoft are Motley Fool Inside Value recommendations. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.