The company reported net income of US$1.18 billion during the quarter that ended on Dec. 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.

Revenue for the fourth quarter was $1.65 billion, 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.