It reported net income of $1.18 billion (£726 million) during the quarter that ended on December 26, an improvement over the loss of $1.44 billion it reported in the fourth quarter of 2008. The company reported diluted earnings per share of $1.52.
AMD reported revenue of $1.65 billion for the fourth quarter, a gain of 42 percent compared to the same period last year. The revenue beat estimates of analysts polled by Thomson Reuters, who expected revenue of $1.5 billion.
Revenue was driven by a healthy holiday sales period for PCs using its chips and increased demand for its Radeon graphics cards, AMD said. The $1.25 billion Intel paid AMD in November to settle a lawsuit also helped. AMD had accused Intel of offering rebates that kept AMD from making deals with PC makers.
Microprocessor revenue during the quarter was $1.2 billion, up 14 percent compared to the same quarter of the previous year. Graphics segment revenue was $427 million, up 40 percent.
"AMD's quarter marks another milestone in our transformation and underscores our growing momentum," said AMD CEO and President Dirk Meyer in a statement.
AMD suffered three years of consecutive losses as it failed to launch chips as scheduled and, more recently, because of lower chip sales during the recession. The company also took billions of dollars in charges related to the acquisition of graphics firm ATI in 2007.
In an effort to turn things around, AMD divested assets, cut staff and re-established itself as a chip design firm by spinning off its debt-heavy manufacturing facilities to a separate entity now known as GlobalFoundries. AMD remains a minority shareholder in GlobalFoundries.