“In 2018 we delivered our second straight year of significant revenue growth, market share gains, expanded gross margin and improved profitability based on our high-performance products. Importantly, we more than doubled our EPYC processor shipments sequentially and delivered record GPU datacenter revenue in the quarter,” said Dr. Lisa Su, AMD president and CEO. “Despite near-term graphics headwinds, 2019 is shaping up to be another exciting year driven by the launch of our broadest and most competitive product portfolio ever with our next-generation 7nm Ryzen, Radeon, and EPYC products.”

2018 Annual Results

• Revenue of $6.48 billion was up 23 percent year-over-year primarily driven by higher revenue in the Computing and Graphics segment.
  
• Gross margin was 38 percent compared to 34 percent for the prior year. Non-GAAP⁽¹⁾ gross margin was 39 percent compared to 34 percent in the prior year. Gross margin expansion was primarily driven by our new Ryzen™ , EPYC™ and Radeon™ products.
  
• Operating income was $451 million compared to $127 million in the prior year. Non-GAAP operating income was $633 million compared to $224 million in the prior year. The operating income improvement was primarily due to higher revenue and gross margin expansion partially offset by higher operating expenses.
  
• Net income was $337 million compared to a net loss of $33 million in the prior year. Non-GAAP net income was $514 million compared to $103 million in the prior year.
  
• Diluted earnings per share was $0.32 compared to a loss per share of $0.03 in 2017. Non-GAAP diluted earnings per share was $0.46 compared to $0.10 in the prior year.
  
• Cash, cash equivalents and marketable securities were $1.16 billion at the end of the year, down slightly from $1.18 billion at the end of 2017.
  
• Free cash flow was negative $129 million for the year due to higher inventory related to new products and to the timing of collections.

Q4 2018 Results

• Revenue of $1.42 billion was up 6 percent year-over-year primarily driven by the Computing and Graphics segment. Revenue was down 14 percent compared to the prior quarter as a result of lower revenue in the Enterprise, Embedded and Semi-Custom segment. Third quarter 2018 included approximately $125 million of IP-related revenue.
  
• Gross margin was 38 percent compared to 34 percent a year ago and 40 percent in the prior quarter. Fourth quarter gross margin included a $45 million charge related to older technology licenses that are no longer being used. Non-GAAP gross margin was 41 percent compared to 34 percent a year ago and 40 percent in the prior quarter. Gross margin improvements were primarily driven by Ryzen and EPYC processor sales.
  
• Operating income was $28 million compared to an operating loss of $2 million a year ago and operating income of $150 million in the prior quarter. On a non-GAAP basis, operating income was $109 million compared to $19 million a year ago and $186 million in the prior quarter. The year-over-year improvement was primarily due to the ramp of higher margin products in the Computing and Graphics segment. The decrease compared to the prior quarter was primarily due to seasonally lower Enterprise, Embedded and Semi-Custom segment revenue and the absence of IP-related revenue, partially offset by the benefit of new Ryzen, EPYC and Radeon products.
  
• Net income was $38 million compared to a net loss of $19 million a year ago and net income of $102 million in the prior quarter. On a non-GAAP basis, net income was $87 million compared to $8 million a year ago and $150 million in the prior quarter.
  
• Diluted earnings per share was $0.04 compared to a loss per share of $0.02 a year ago and diluted earnings per share of $0.09 in the prior quarter.  On a non-GAAP basis, diluted earnings per share was $0.08 compared to $0.01 a year ago and $0.13 in the prior quarter.
  
• Cash, cash equivalents and marketable securities were $1.16 billion at the end of the quarter as compared to $1.06 billion at the end of the prior quarter.
  
• Free cash flow was $79 million for the quarter.

Quarterly Financial Segment Summary

• Computing and Graphics segment revenue was $986 million, up 9 percent year-over-year and 5 percent compared to the prior quarter driven by strong sales of Ryzen processors.
  
  • Operating income was $115 million compared to $33 million a year ago and $100 million in the prior quarter. The year-over-year improvement was primarily driven by the ramp of Ryzen processors. The improvement compared to the prior quarter was primarily driven by Ryzen processors and datacenter GPUs, which more than offset the benefit of IP-related revenue in the third quarter of 2018.
    
  • Client processor average selling price (ASP) was up year-over-year and sequentially driven by Ryzen processor sales.
    
  • GPU ASP was up year-over-year and sequentially primarily due to higher datacenter GPU sales.
    
• Enterprise, Embedded and Semi-Custom segment revenue was $433 million, flat year-over-year. Revenue declined 39 percent compared to the prior quarter driven by seasonally lower semi-custom sales, partially offset by strong EPYC datacenter processor sales.
  
  • Operating loss was $6 million compared to an operating loss of $13 million a year ago and operating income of $86 million in the prior quarter. The year-over-year improvement was primarily due to higher EPYC datacenter processor revenue partially offset by lower semi-custom sales and server-related investments. The decrease compared to the prior quarter was due to seasonally lower semi-custom sales, partially offset by higher EPYC datacenter processor revenue.
    
• All Other operating loss was $81 million compared to operating losses of $22 million year-over-year and $36 million in the prior quarter, primarily due to the $45 million charge related to older technology licenses.