Thank you, Lisa, and good afternoon, everyone. 2019 was an outstanding year for AMD. Our competitive product portfolio and market share gains drove the highest annual and highest quarterly revenue in AMD's history. We achieved our highest annual gross margin percentage and annual free cash flow since 2011, and we improved non-GAAP earnings per share by 39% year-over-year. In short, we are very pleased with our financial performance.
Fourth quarter revenue was $2.13 billion, up 50% from a year ago and up 18% from the prior quarter, driven by strong sales of Ryzen and EPYC processors and Radeon GPUs, partially offset by softer semi-custom sales. Gross margin was 45%, up 360 basis points from a year ago, driven primarily by sales of our leadership 7-nanometer products. Operating expenses were $545 million, with increased investments in go-to-market activities and R&D, compared to $474 million a year ago. Operating income was $405 million, up $296 million from a year ago, driven by revenue growth and higher gross margin. Operating margin was 19% as compared to 8% a year ago. Net income was $383 million, up $296 million from a year ago, and diluted earnings per share was $0.32 per share compared to $0.08 per share a year ago.
Now turning to the business segment results. Computing and Graphics segment revenue was $1.66 billion, up 69% year-over-year, driven by Ryzen processor and Radeon gaming GPU sales growth. Computing and Graphics segment operating income was $360 million or 22% of revenue compared to $115 million a year ago, driven by higher revenue. Enterprise, Embedded and Semi-Custom segment revenue was $465 million, up 7% from $433 million the prior year. The continued growth of EPYC processor sales was partially offset by softer semi-custom revenue. EPYC processor revenue grew by a strong double-digit percentage sequentially, driven by robust shipments of our second-generation EPYC processors. EESC segment operating income was $45 million or 10% of revenue, driven by EPYC processor sales, compared to an operating loss of $6 million a year ago.
During the quarter, we reduced gross debt by $524 million, which resulted in a GAAP loss of $128 million. These debt reductions result in an annualized interest expense savings of approximately $16 million. Free cash flow was positive $400 million in the fourth quarter, and cash flow from operations was $442 million. Inventory was $1 billion, down 6% from the prior quarter. Fourth quarter adjusted EBITDA was $469 million compared to $152 million a year ago, driven by higher quarterly earnings.
Now let me cover the full year results. 2019 revenue was $6.73 billion, up 4% year-on-year, driven by strong growth in Computing and Graphics segment and sales of second-generation EPYC processors, partially offset by a decline in semi-custom sales. Excluding semi-custom, revenue was up more than 20% year-over-year. Gross margin of 43% was up 420 basis points from the prior year, driven by our current generation of Ryzen and EPYC products. Operating expenses were 31% of revenue as we increase go-to-market activities and investments in R&D. 2019 operating income was up 33% from a year ago to $840 million or 12% of revenue. Net income was $756 million, up 46 — 47% from the prior year.
Turning to the balance sheet. I am extremely pleased with our progress on the strengthening balance sheet. Cash, cash equivalents and marketable securities totaled $1.5 billion at year-end, while gross debt was $563 million. This represents our highest net cash position since the third quarter of 2006. Full year free cash flow was $276 million. We reduced principal debt by almost $1 billion in 2019, and ended the year with less than $600 million of gross debt. On a trailing 12-month basis, adjusted EBITDA was $1.1 billion, resulting in gross leverage of 0.5x, down from 1.9x at the end of 2018. Now turning to the outlook for the first quarter of 2020.
We expect revenue to be approximately $1.8 billion, plus or minus $50 million, an increase of approximately 42% year-over-year and a decrease of approximately 15% sequentially. The year-over-year increase is expected to be driven by strong growth in Ryzen, EPYC and Radeon product sales. The sequential decrease is driven primarily by negligible semi-custom revenue, which continues to soften in advance of the ramp of next-generation products in addition to seasonality. In addition, for Q1 2020, we expect non-GAAP gross margin to be approximately 46%; non-GAAP operating expenses to be approximately $580 million; non-GAAP interest expense, taxes and other to be approximately $18 million; and the first quarter diluted share count is expected to be approximately 1.22 billion shares. For the full year 2020, we expect revenue growth of approximately 28% to 30%, driven by strength across all businesses. We expect non-GAAP gross margin to be approximately 45%, non-GAAP operating expenses to be approximately 28% of revenue and a non-GAAP tax rate of approximately 3% of pretax income.
In closing, we had an excellent fourth quarter and an excellent 2019. Our full year financial results highlight the strength of our business model. I look forward to what we have in store for 2020 as we expect to further expand and ramp our leadership portfolio of high-performance products to drive revenue growth, gross margin expansion, market share gains and financial momentum.
With that, I'll turn it back to Laura for the question-and-answer session. Laura?