Intel Corp's fourth-quarter revenue and margin outlook handily beat Wall Street's expectations, helped by better pricing and demand for server chips, underscoring hopes for a 2010 tech sector recovery and sending the stock rising.

Intel said its gross profit margin in the fourth quarter was a record 65 percent, and would range from 59 percent to 63 percent in the current quarter.

They did a nice job on the topline which exceeded our expectations. The gross margins were better than we had even expected, said Broadpoint AmTech analyst Doug Freedman.

Looking forward, we're encouraged by the low capital spending and the projection that gross margin would continue to operate within a very tight range, he said.

Technology stocks rallied following Intel's earnings report. Chip rival Advanced Micro Devices gained 1.6 percent, while Microsoft Corp climbed nearly 1 percent after hours.

Intel said on Thursday that net income totaled $2.3 billion, or 40 cents a share, in the three months ended December 26, compared with net income of $234 million, or 4 cents a share, in the year-ago period when the company incurred a $1.1 billion write-down related primarily to its investment in wireless service provider Clearwire Corp.

Revenue rose to $10.6 billion from $8.2 billion in the year-ago period, and above the Wall Street target of roughly $10.2 billion.

Intel forecast revenue for the current quarter of $9.7 billion, plus or minus $400 million.

Analysts polled by Thomson Reuters I/B/E/S, on average, expect current-quarter revenue of $9.3 billion.

Shares of the Santa Clara-based company rose 2.1 percent to $21.94 in after-hours trading after closing Thursday's regular trading session at $21.48 on Nasdaq.

(Reporting by Ian Sherr and Alexei Oreskovic; Editing by Richard Chang)

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