Advanced Micro Devices (NASDAQ:AMD) reported its fourth-quarter results after the market close on Jan. 19, beating analyst estimates for revenue and reporting in-line earnings. Revenue continued to slump on a year-over-year basis, and the company reported its fifth GAAP quarterly loss in a row. Here's what investors need to know about AMD's earnings.

Earnings rundown
AMD reported fourth-quarter revenue of $958 million, down 22.7% year over year, and down 9.6% compared to the third quarter. The Computing and Graphics segment, which includes PC CPUs and GPUs, suffered a 29% year-over-year revenue decline, generating revenue of $470 million.

The good news is that AMD managed to grow sales in this segment compared to the third quarter, posting 11% sequential revenue growth driven by higher notebook processor sales. The bad news is that the segment still generated a hefty $99 million operating loss. This is, however, an improvement compared to the third quarter, when AMD reported an operating loss of $181 million, including a $65 million inventory write-off charge.

The Enterprise, Embedded, and Semi-Custom segment, which is mostly comprised of SoCs that go into the major game consoles, suffered an expected revenue decline, given that game console revenue peaks in the third quarter for AMD. The segment generated sales of $488 million, down 15.4% year over year, and down 23.4% compared to the third quarter. The year-over-year decline was driven by lower game console royalties, which is not unexpected, since AMD gets less revenue per game console over time. Operating income was $59 million, down from $109 million during the fourth quarter of 2014.

Overall, AMD reported a GAAP operating loss of $49 million and a GAAP net loss of $102 million, or $0.13 per share. On a non-GAAP basis, an operating loss of $39 million and a net loss of $79 million mark an improvement compared to the third quarter, but are still a far cry from the non-GAAP profits AMD posted during the fourth quarter of 2014.

Looking forward, AMD expects revenue to decline by 14% sequentially during the first quarter to about $824 million. This represents a 20% year-over-year revenue decline.

Not much to like
It was widely expected that AMD was going to have a bad fourth quarter, but it's no doubt disappointing that the company expects revenue to decline by so much during the first quarter. Analysts were expecting AMD to guide for a 6% sequential revenue decline, and this weak guidance sent the stock tumbling in after-hours trading. AMD blamed game console seasonality, as well as macro issues in China, for the weak guidance.

Despite weak guidance for the first quarter, the company has guided for revenue to grow in 2016 compared to 2015, in addition to a return to non-GAAP profitability in the second half of the year. Hitting these goals will require AMD's upcoming Polaris GPUs and Zen CPUs to both launch on time and lead to market share gains. The new GPUs are expected in the middle of the year, while Zen is expected to launch toward the end of the year.

Before investors get too excited about AMD's full-year guidance, I'd like to remind everyone about AMD's Financial Analyst Day event last May. During that event, the company guided for a 15% increase in revenue during the second half of 2015 compared to the first half, as well as a return to non-GAAP profitability.

That guidance sounded optimistic at the time, and the company didn't even come close to meeting it. Revenue during the second half of 2015 increased by just 2.4% compared to the first half, and the company posted a cumulative non-GAAP net loss of $215 million. I would take AMD's full-year guidance with a grain of salt.

A real turnaround isn't going to happen until AMD starts winning back some serious market share in the GPU and CPU markets, and that requires the new products slated for 2016 and 2017. The future of AMD is riding on the success of Zen, and the company can't afford to fall short this time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.