First Call consensus pegged the video game publisher for a profit of 1 cent a share on sales of $100 million.
Activision shares closed up $1.69 to $28.95 ahead of the earnings report before surging to $30.90 in after-hours trading.
The $127 million in sales represents a 22 percent improvement from the year-ago quarter, when it posted a loss of $53 million, or $2.07 a share, on sales of $104 million.
"Overall, fiscal 2001 was a good year for us," Chief Executive Robert Kotick said during a conference call with analysts. "Over the next five years, we're likely to see video game sales double."
In the fiscal year, Activision earned $21 million, or 75 cents a share, on sales of $620 million, up 8 percent from fiscal 2000, when it posted a loss of $34 million, or $1.38 a share, on sales of $572 million.
It exited the quarter with $126 million in cash and short-term investments, up from $50 million at the end of fiscal 2000.
Activision also raised estimates for the first quarter and all of fiscal 2002.
It now expects to post a loss of 5 cents a share on sales of $100 million compared with the current First Call estimate calling for a loss of 18 cents a share on sales of $85 million.
For fiscal 2002, Activision predicts it will earn between 76 cents and 80 cents a share, up from the current consensus estimate of 77 cents a share.
Last quarter, Activision shattered analysts' estimates when it earned $22.3 million, or 70 cents a share, topping the Street estimate by 10 cents a share.
The stock moved up to a 52-week high of $29.69 earlier this month after falling to a low of $5.38 in June.
Eleven of the 12 analysts tracking the stock rate it either a "buy" or a "strong buy."