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| Segment Trends and Results | |
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| Consolidated Condensed Results of Operations | |
| Liquidity and Capital Resources | |
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| Non-GAAP Financial Measures | |
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Risk Factors and Other Key Information | |
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| Quantitative and Qualitative Disclosures About Market Risk | |
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| Controls and Procedures | |
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| Issuer Purchases of Equity Securities | |
| Rule 10b5-1 Trading Arrangements | |
| Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934 | |
| Exhibits | |
| Form 10-Q Cross-Reference Index | |
Forward-Looking Statements
This Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as "accelerate", "achieve", "aim", "ambitions", "anticipate", "believe", "committed", "continue", "could", "designed", "estimate", "expect", "forecast", "future", "goals", "grow", "guidance", "intend", "likely", "may", "might", "milestones", "next generation", "objective", "on track", "opportunity", "outlook", "pending", "plan", "position", "possible", "potential", "predict", "progress", "ramp", "roadmap", "seek", "should", "strive", "targets", "to be", "upcoming", "will", "would", and variations of such words and similar expressions are intended to identify such forward-looking statements, which may include statements regarding:
•our business plans and strategy and anticipated benefits therefrom, including with respect to our IDM 2.0 strategy, Smart Capital strategy, partnership with Brookfield, internal foundry model, updated reporting structure, and AI strategy;
•projections of our future financial performance, including future revenue, gross margins, capital expenditures, and cash flows;
•projected costs and yield trends;
•future cash requirements, the availability, uses, sufficiency, and cost of capital resources, and sources of funding, including for future capital and R&D investments and for returns to stockholders, such as stock repurchases and dividends, and credit ratings expectations;
•future products, services, and technologies, and the expected goals, timeline, ramps, progress, availability, production, regulation, and benefits of such products, services, and technologies, including future process nodes and packaging technology, product roadmaps, schedules, future product architectures, expectations regarding process performance, per-watt parity, and metrics, and expectations regarding product and process leadership;
•investment plans and impacts of investment plans, including in the US and abroad;
•internal and external manufacturing plans, including future internal manufacturing volumes, manufacturing expansion plans and the financing therefor, and external foundry usage;
•future production capacity and product supply;
•supply expectations, including regarding constraints, limitations, pricing, and industry shortages;
•plans and goals related to Intel's foundry business, including with respect to anticipated customers, future manufacturing capacity and service, technology, and IP offerings;
•expected timing and impact of acquisitions, divestitures, and other significant transactions, including the sale of our NAND memory business;
•expected completion and impacts of restructuring activities and cost-saving or efficiency initiatives;
•future social and environmental performance goals, measures, strategies, and results;
•our anticipated growth, future market share, and trends in our businesses and operations;
•projected growth and trends in markets relevant to our businesses;
•anticipated trends and impacts related to industry component, substrate, and foundry capacity utilization, shortages, and constraints;
•expectations regarding government incentives;
•future technology trends and developments, such as AI;
•future macro environmental and economic conditions;
•geopolitical tensions and conflicts and their potential impact on our business;
•tax- and accounting-related expectations;
•expectations regarding our relationships with certain sanctioned parties; and
•other characterizations of future events or circumstances.
Such statements involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied, including those associated with:
•the high level of competition and rapid technological change in our industry;
•the significant long-term and inherently risky investments we are making in R&D and manufacturing facilities that may not realize a favorable return;
•the complexities and uncertainties in developing and implementing new semiconductor products and manufacturing process technologies;
•our ability to time and scale our capital investments appropriately and successfully secure favorable alternative financing arrangements and government grants;
•implementing new business strategies and investing in new businesses and technologies;
•changes in demand for our products;
•macroeconomic conditions and geopolitical tensions and conflicts, including geopolitical and trade tensions between the US and China, the impacts of Russia's war on Ukraine, tensions and conflict affecting Israel and the Middle East, and rising tensions between mainland China and Taiwan;
•the evolving market for products with AI capabilities;
•our complex global supply chain, including from disruptions, delays, trade tensions and conflicts, or shortages;
•product defects, errata and other product issues, particularly as we develop next-generation products and implement next-generation manufacturing process technologies;
•potential security vulnerabilities in our products;
•increasing and evolving cybersecurity threats and privacy risks;
•IP risks including related litigation and regulatory proceedings;
•the need to attract, retain, and motivate key talent;
•strategic transactions and investments;
•sales-related risks, including customer concentration and the use of distributors and other third parties;
•our significantly reduced return of capital in recent years;
•our debt obligations and our ability to access sources of capital;
•complex and evolving laws and regulations across many jurisdictions;
•fluctuations in currency exchange rates;
•changes in our effective tax rate;
•catastrophic events;
•environmental, health, safety, and product regulations;
•our initiatives and new legal requirements with respect to corporate responsibility matters; and
•other risks and uncertainties described in this report, our 2023 Form 10-K and our other filings with the SEC.
Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business.
Unless specifically indicated otherwise, the forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-Q are based on management's expectations as of the date of this filing, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable. We do not undertake, and expressly disclaim any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.
Availability of Company Information
We use our Investor Relations website, www.intc.com, as a routine channel for distribution of important, and often material, information about us, including our quarterly and annual earnings results and presentations, press releases, announcements, information about upcoming webcasts, analyst presentations, and investor days, archives of these events, financial information, corporate governance practices, and corporate responsibility information. We also post our filings on this website the same day they are electronically filed with, or furnished to, the SEC, including our annual and quarterly reports on Forms 10-K and 10-Q and current reports on Form 8-K, our proxy statements, and any amendments to those reports. All such information is available free of charge. Our Investor Relations website allows interested persons to sign up to automatically receive e-mail alerts when we post financial information and issue press releases, and to receive information about upcoming events. We encourage interested persons to follow our Investor Relations website in addition to our filings with the SEC to timely receive information about the company.
Intel, the Intel logo, Intel Core, and Altera are trademarks of Intel Corporation or its subsidiaries in the US and/or other countries.
* Other names and brands may be claimed as the property of others.
Total revenue of $12.7 billion was up $1.0 billion or 9% from Q1 2023, as CCG revenue increased 31%, DCAI revenue increased 5%, and NEX revenue decreased 8%. CCG revenue increased primarily due to higher notebook and desktop volumes as customer inventory levels normalized compared to higher levels in Q1 2023. DCAI revenue increased due to higher server ASPs primarily due to a lower mix of hyperscale customer-related revenue and a higher mix of high core count products, partially offset by lower server volume due to lower demand in a competitive environment and a higher mix of high core count products. NEX revenue decreased primarily due to 5G customers tempering purchases to reduce existing inventories, partially offset by higher Edge and Network revenue. Altera, an Intel Company (previously Intel's Programmable Solutions Group) and Mobileye revenue decreased as customers tempered purchases to reduce existing inventories.
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| Revenue | | Gross Margin | | Diluted EPS attributable to Intel | | Cash Flows |
■ GAAP $B | | ■ GAAP ■ Non-GAAP | | ■ GAAP ■ Non-GAAP | | ■ Operating Cash Flow $B ■ Adjusted Free Cash Flow $B |
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| $12.7B | | 41.0% | | 45.1% | | $(0.09) | | $0.18 | | $(1.2)B | | $(6.2)B |
| GAAP | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 |
| Revenue up $1.0B or 9% from Q1 2023 | | Gross margin up 6.8 ppts from Q1 2023 | | Gross margin up 6.7 ppts from Q1 2023 | | Diluted EPS attributable to Intel up $0.57 or 86% from Q1 2023 | | Diluted EPS attributable to Intel up $0.22 from Q1 2023 | | Operating cash flow up $0.6B or 31% from Q1 2023 | | Adjusted free cash flow up $2.6B or 30% from Q1 2023 |
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Higher CCG revenue. | | Higher GAAP gross margin from higher revenue and lower period charges, partially offset by higher unit cost. | | Higher GAAP EPS attributable to Intel from higher gross margin and a tax benefit compared to a tax expense in Q1 2023, partially offset by higher operating expenses. | | Lower cash used for operating activities driven primarily by a reduced net operating loss, partially offset by certain cash unfavorable changes in working capital. |
Key Developments
▪We launched Intel Foundry as a more sustainable systems foundry business designed for the AI era and announced an expanded process roadmap, which includes evolutions for Intel 3, Intel 18A, and Intel 14A process technologies.
▪The U.S. Department of Commerce has proposed up to $8.5 billion in direct funding and to make up to $11.0 billion in loans available under the CHIPS and Science Act to help advance our manufacturing and research and development projects at sites in Arizona, New Mexico, Ohio, and Oregon.
▪We launched Altera® as a new standalone FPGA company, in order to deliver programmable solutions and accessible AI across a broad range of applications in the cloud, network, and edge markets.
▪We opened Fab 9 in New Mexico, producing the world's most advanced packaging solutions at scale.
1 See "Non-GAAP Financial Measures" within MD&A.
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Consolidated Condensed Statements of Income | |
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(In Millions, Except Per Share Amounts; Unaudited) | | Mar 30, 2024 | | Apr 1, 2023 | |
| Net revenue | | $ | | | | $ | | | |
| Cost of sales | | | | | | | |
| Gross margin | | | | | | | |
| Research and development | | | | | | | |
| Marketing, general, and administrative | | | | | | | |
| Restructuring and other charges | | | | | | | |
| Operating expenses | | | | | | | |
| Operating income (loss) | | () | | | () | | |
| Gains (losses) on equity investments, net | | | | | | | |
| Interest and other, net | | | | | | | |
| Income (loss) before taxes | | () | | | () | | |
| Provision for (benefit from) taxes | | () | | | | | |
| Net income (loss) | | () | | | () | | |
| Less: Net income (loss) attributable to non-controlling interests | | () | | | () | | |
| Net income (loss) attributable to Intel | | $ | () | | | $ | () | | |
| Earnings (loss) per share attributable to Intel—basic | | $ | () | | | $ | () | | |
| Earnings (loss) per share attributable to Intel—diluted | | $ | () | | | $ | () | | |
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| Weighted average shares of common stock outstanding: | | | | | |
| Basic | | | | | | | |
| Diluted | | | | | | | |
See accompanying notes.
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| Financial Statements | Consolidated Condensed Statements of Income | 4 |
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Consolidated Condensed Statements of Comprehensive Income | |
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(In Millions; Unaudited) | | Mar 30, 2024 | | Apr 1, 2023 | |
| Net income (loss) | | $ | () | | | $ | () | | |
| Changes in other comprehensive income (loss), net of tax: | | | | | |
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| Net unrealized holding gains (losses) on derivatives | | () | | | | | |
| Actuarial valuation and other pension benefits (expenses), net | | | | | | | |
| Translation adjustments and other | | | | | | | |
| Other comprehensive income (loss) | | () | | | | | |
| Total comprehensive income (loss) | | () | | | () | | |
| Less: comprehensive income (loss) attributable to non-controlling interests | | () | | | () | | |
| Total comprehensive income (loss) attributable to Intel | | $ | () | | | $ | () | | |
See accompanying notes.
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| Financial Statements | Consolidated Condensed Statements of Comprehensive Income | 5 |
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Consolidated Condensed Balance Sheets | |
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(In Millions; Unaudited) | | Mar 30, 2024 | | Dec 30, 2023 |
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| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | | | | $ | | |
| Short-term investments | | | | | | |
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| Accounts receivable, net | | | | | | |
| Inventories | | | | | | |
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| Other current assets | | | | | | |
| Total current assets | | | | | | |
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| Property, plant, and equipment, net of accumulated depreciation of $99,315 ($98,010 as of December 30, 2023) | | | | | | |
| Equity investments | | | | | | |
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| Goodwill | | | | | | |
| Identified intangible assets, net | | | | | | |
| Other long-term assets | | | | | | |
| Total assets | | $ | | | | $ | | |
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| Liabilities and stockholders’ equity | | | | |
| Current liabilities: | | | | |
| Short-term debt | | $ | | | | $ | | |
| Accounts payable | | | | | | |
| Accrued compensation and benefits | | | | | | |
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| Income taxes payable | | | | | | |
| Other accrued liabilities | | | | | | |
| Total current liabilities | | | | | | |
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| Debt | | | | | | |
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| Other long-term liabilities | | | | | | |
| Contingencies (Note 13) | | | | | | |
| Accumulated other comprehensive income (loss) | | () | | | () | |
| Retained earnings | | | | | | |
| Total Intel stockholders' equity | | | | | | |
| Non-controlling interests | | | | | | |
| Total stockholders' equity | | | | | | |
| Total liabilities and stockholders’ equity | | $ | | | | $ | | |
See accompanying notes.
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| Financial Statements | Consolidated Condensed Balance Sheets | 6 |
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Consolidated Condensed Statements of Cash Flows | |
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| | Three Months Ended |
(In Millions; Unaudited) | | Mar 30, 2024 | | Apr 1, 2023 |
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| Cash and cash equivalents, beginning of period | | $ | | | | $ | | |
| Cash flows provided by (used for) operating activities: | | | | |
| Net income (loss) | | () | | | () | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
| Depreciation | | | | | | |
| Share-based compensation | | | | | | |
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| Restructuring and other charges | | | | | | |
| Amortization of intangibles | | | | | | |
| (Gains) losses on equity investments, net | | () | | | () | |
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| Changes in assets and liabilities: | | | | |
| Accounts receivable | | | | | | |
| Inventories | | () | | | | |
| Accounts payable | | () | | | () | |
| Accrued compensation and benefits | | () | | | () | |
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| Income taxes | | () | | | | |
| Other assets and liabilities | | () | | | () | |
| Total adjustments | | () | | | | |
| Net cash provided by (used for) operating activities | | () | | | () | |
| Cash flows provided by (used for) investing activities: | | | | |
| Additions to property, plant, and equipment | | () | | | () | |
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| Proceeds from capital-related government incentives | | | | | | |
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| Purchases of short-term investments | | () | | | () | |
| Maturities and sales of short-term investments | | | | | | |
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| Other investing | | () | | | | |
| Net cash provided by (used for) investing activities | | () | | | () | |
| Cash flows provided by (used for) financing activities: | | | | |
| Issuance of commercial paper, net of issuance costs | | | | | | |
| Repayment of commercial paper | | | | | () | |
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| Payments on finance leases | | | | | () | |
| Partner contributions | | | | | | |
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| Issuance of long-term debt, net of issuance costs | | | | | | |
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| Proceeds from sales of common stock through employee equity incentive plans | | | | | | |
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| Payment of dividends to stockholders | | () | | | () | |
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| Other financing | | () | | | () | |
| Net cash provided by (used for) financing activities | | | | | | |
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| Net increase (decrease) in cash and cash equivalents | | () | | | () | |
| Cash and cash equivalents, end of period | | $ | | | | $ | | |
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| Supplemental disclosures: | | | | |
| Acquisition of property, plant, and equipment included in accounts payable and accrued liabilities | | $ | | | | $ | | |
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| Cash paid during the period for: | | | | |
| Interest, net of capitalized interest | | $ | | | | $ | | |
| Income taxes, net of refunds | | $ | | | | $ | | |
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See accompanying notes.
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| Financial Statements | Consolidated Condensed Statements of Cash Flows | 7 |
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Consolidated Condensed Statements of Stockholders' Equity | |
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| (In Millions, Except Per Share Amounts; Unaudited) | | Common Stock and Capital in Excess of Par Value | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Non-Controlling Interests | | Total |
| Shares | | Amount | | | | |
| Three Months Ended | | | | | | | | | | | | |
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| Balance as of December 30, 2023 | | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
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| Net income (loss) | | — | | | — | | | — | | | () | | | () | | | () | |
| Other comprehensive income (loss) | | — | | | — | | | () | | | — | | | — | | | () | |
| Net proceeds from partner contributions | | — | | | | | | — | | | — | | | | | | | |
| Employee equity incentive plans and other | | | | | | | | — | | | — | | | — | | | | |
| Share-based compensation | | — | | | | | | — | | | — | | | | | | | |
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| Restricted stock unit withholdings | | () | | | () | | | — | | | () | | | — | | | () | |
| Cash dividends declared ($0.13 per share of common stock) | | — | | | — | | | — | | | () | | | — | | | () | |
| Balance as of March 30, 2024 | | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
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| Balance as of December 31, 2022 | | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
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| Net income (loss) | | — | | | — | | | — | | | () | | | () | | | () | |
| Other comprehensive income (loss) | | — | | | — | | | | | | — | | | — | | | | |
| Net proceeds from partner contributions | | — | | | — | | | — | | | — | | | | | | | |
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| Employee equity incentive plans and other | | | | | | | | — | | | — | | | — | | | | |
| Share-based compensation | | — | | | | | | — | | | — | | | | | | | |
| Restricted stock unit withholdings | | () | | | () | | | — | | | | | | — | | | () | |
| Cash dividends declared ($0.49 per share of common stock) | | — | | | — | | | — | | | () | | | — | | | () | |
| Balance as of April 1, 2023 | | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
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| Financial Statements | Consolidated Condensed Statements of Stockholders' Equity | 8 |
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Notes to Consolidated Condensed Financial Statements | |
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| Financial Statements | Notes to Financial Statements | 9 |
million in first three months of 2024 and $ million in the first three months of 2023.▪Segment expenses: consists of direct expenses for technology development, product manufacturing and services provided by Intel Foundry to internal and external customers, allocated expenses as described below, and direct operating expenses. Direct expenses for product manufacturing includes excess capacity charges that were previously allocated primarily to CCG, DCAI, and NEX.
All other: Altera & Mobileye
▪Segment revenue: consists of product revenues from third party customers. Altera revenue is derived from programmable semiconductors, primarily FPGAs, CPLDs, acceleration platforms, software, IP, and related products. Mobileye revenue is derived from advanced driver-assistance systems (ADAS) and autonomous driving technologies and solutions.
▪Segment expenses: Altera expenses consist of intersegment charges for product manufacturing and related services from Intel Foundry, third party manufacturing, allocated expenses as described below, and direct operating expenses. Mobileye expenses consists of third party direct expenses for product manufacturing and related services for the manufacturing of Mobileye products and direct operating expenses.
Our "all other" category also consists of "other", which includes:
▪results of operations from non-reportable segments not otherwise presented, and from start-up businesses that support our initiatives; and
▪historical results of operations from divested businesses.
We allocate operating expenses from our sales and marketing group to the Intel Products operating segments, and allocate operating expenses from our finance and administration groups to all of our operating segments, except Mobileye. Previously, operating expense from all of these groups as well as manufacturing and engineering, were generally allocated to all the operating segments, except Mobileye.
We estimate that the substantial majority of our consolidated depreciation expense was incurred by Intel Foundry in the first three months of 2024 and in the first three months of 2023. Intel Foundry depreciation expense is substantially included in overhead cost pools and then combined with other costs, and subsequently absorbed into inventory as each product passes through the manufacturing process and is sold to Intel Products and other customers. As a result, it is impractical to determine the total depreciation expense included as a component of each Intel Products operating segment's operating income (loss) results.
We do not allocate to our operating segments corporate operating expenses that primarily consist of:
▪restructuring and other charges;
▪share-based compensation;
▪certain impairment charges; and
▪certain acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
We do not allocate to our operating segments non-operating items such as:
▪gains and losses from equity investments;
▪interest and other income; and
▪income taxes.
The CODM, who is our CEO, allocates resources to and assesses the performance of each operating segment using information about the operating segment's revenue and operating income (loss). Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. The measures regularly provided to and used by our CODM under our new operating model continue to evolve; currently, our CODM does not regularly review or receive discrete asset information by segment.
Intersegment eliminations: Intersegment sales and related gross margin on inventory recorded at the end of the period or sold through to third party customers is eliminated for consolidation purposes. The Intel Products operating segments and Intel Foundry are meant to reflect separate fabless semiconductor and foundry companies. Thus certain intersegment activity is captured within the intersegment eliminations upon consolidation and presented at the Intel consolidated level. This activity primarily relates to inventory reserves which are determined and recorded based on our accounting policies for Intel as a whole, but are only recorded by the Intel Products operating segments upon transfer of inventory from Intel Foundry. If a reserve is identified prior to the related inventory transferring to Intel Products, that reserve is presented as activity within the intersegment eliminations.
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| Financial Statements | Notes to Financial Statements | 10 |
million in the first three months of 2024 related to our new Intel Foundry reporting unit as the estimated fair value of the new reporting unit was lower than the assigned carrying value, which now includes substantially all of our allocated property, plant, and equipment. The Intel Foundry reporting unit has no remaining goodwill. The fair value substantially exceeded the carrying value for all remaining reporting units tested as part of our post-reorganization impairment test. | | $ | | | | Notebook | | | | | | | |
Other | | | | | | | |
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Data Center and AI | | | | | | | |
Network and Edge | | | | | | | |
| Total Intel Products revenue | | $ | | | | $ | | | |
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| Intel Foundry | | $ | | | | $ | | | |
All other | | | | | |
Altera | | | | | | | |
Mobileye | | | | | | | |
Other | | | | | | | |
Total all other revenue | | | | | | | |
Total operating segment revenue | | $ | | | | $ | | | |
Intersegment eliminations | | () | | | () | | |
| Total net revenue | | $ | | | | $ | | | |
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Segment operating income (loss): | | | | | |
Intel Products: | | | | | |
Client Computing Group | | $ | | | | $ | | | |
Data Center and AI | | | | | | | |
Network and Edge | | | | | () | | |
Total Intel Products operating income (loss) | | $ | | | | $ | | | |
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| Intel Foundry | | $ | () | | | $ | () | | |
All Other | | | | | |
Altera | | () | | | | | |
Mobileye | | () | | | | | |
Other | | () | | | () | | |
Total all other operating income (loss) | | () | | | | | |
| Total segment operating income (loss) | | $ | | | | $ | () | | |
Intersegment eliminations | | | | | | | |
Corporate unallocated expenses | | () | | | () | | |
| Total operating income (loss) | | $ | () | | | $ | () | | |
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Mobileye | | | | | | % | | | | | | % |
IMS Nanofabrication | | | | | | % | | | | | | % |
Non-controlling interests | | $ | | | | | | $ | | | | |
Semiconductor Co-Investment Program
In 2022, we closed a transaction with Brookfield Asset Management (Brookfield) resulting in the formation of Arizona Fab LLC (Arizona Fab). We consolidate the results of Arizona Fab, a VIE, into our consolidated financial statements because we are the primary beneficiary. Generally, contributions will be made to, and distributions will be received from Arizona Fab based on both parties' proportional ownership. We will be the sole operator and main beneficiary of two new chip factories that will be constructed by Arizona Fab, and we will have the right to purchase % of the related factory output. Once production commences, we will be required to operate Arizona Fab at minimum production levels measured in wafer starts per week and will be required to limit excess inventory held on site or we will be subject to certain penalties.
We have an unrecognized commitment to fund our respective share of the total construction costs of Arizona Fab of $ billion.
As of March 30, 2024, substantially all of the assets of Arizona Fab consisted of property, plant, and equipment. The assets held by Arizona Fab, which can be used only to settle obligations of the VIE and are not available to us, were $ billion as of March 30, 2024 ($ billion as of December 30, 2023).
Mobileye
In 2022, Mobileye completed its IPO and certain other equity financing transactions. During 2023, we converted million of our Mobileye Class B shares into Class A shares, representing % of Mobileye's outstanding capital stock, and subsequently sold the Class A shares for $ per share as part of a secondary offering, receiving net proceeds of $ billion and increasing our capital in excess of par value by $ million, net of tax. We continue to consolidate the results of Mobileye into our consolidated financial statements.
IMS Nanofabrication
% minority stake in our IMS business, a business within our Intel Foundry operating segment —including a % stake to Bain Capital and a % stake to Taiwan Semiconductor Manufacturing Company. Net proceeds resulting from the minority stake sales totaled $ billion, and our capital in excess of par value increased by $ million, net of tax. We continue to consolidate the results of IMS into our consolidated financial statements.
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| Financial Statements | Notes to Financial Statements | 12 |
) | | $ | () | | | | Less: Net income (loss) attributable to non-controlling interests | | () | | | () | | |
| Net income (loss) attributable to Intel | | () | | | () | | |
| Weighted average shares of common stock outstanding—basic | | | | | | | |
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| Weighted average shares of common stock outstanding—diluted | | | | | | | |
| Earnings (loss) per share attributable to Intel—basic | | $ | () | | | $ | () | | |
| Earnings (loss) per share attributable to Intel—diluted | | $ | () | | | $ | () | | | Potentially dilutive shares of common stock from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed issuance of common stock under the stock purchase plan.
Due to our net losses in the three months ended March 30, 2024 and April 1, 2023, the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed issuance of common stock under the stock purchase plan had an anti-dilutive effect on diluted loss per share for the period and were excluded from the computation of diluted loss per share.
million during the first three months of 2024 ($ million in the first three months of 2023). After the sale of our accounts receivable, we expect to collect payment from the customers and remit it to the third-party financial institution. | | $ | | |
Work in process | | | | | | |
Finished goods | | | | | | |
| Total inventories | | $ | | | | $ | | |
billion as of March 30, 2024 ($ billion as of December 30, 2023). | | $ | | | | Interest expense | | () | | | () | | |
Other, net | | | | | | | |
| Total interest and other, net | | $ | | | | $ | | | | Interest expense is net of $ million of interest capitalized in the first three months of 2024 ($ million in the first three months of 2023).
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| Financial Statements | Notes to Financial Statements | 13 |
| | $ | () | | |
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| Litigation charges and other | | | | | | | |
| Asset impairment charges | | | | | | | |
| Total restructuring and other charges | | $ | | | | $ | | | | Employee severance and benefit arrangements includes a charge of $ million in the first quarter of 2024 relating to actions taken to streamline operations and to reduce costs. We expect these actions to be substantially completed by the third quarter of 2024, but this is subject to change. Any changes to the estimates or timing will be reflected in our results of operations.
Asset impairment charges includes a goodwill impairment loss of $ million in the first quarter of 2024 related to our new Intel Foundry reporting unit. Refer to "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements for further information on our business reorganization and goodwill impairment.
) | | $ | () | | |
| Provision for (benefit from) taxes | | $ | () | | | $ | | | |
Effective tax rate | | | % | | () | % | | Our provision for, or benefit from, income taxes for an interim period has historically been determined using an estimated annual effective tax rate, adjusted for discrete items, if any. Under certain circumstances where we are unable to make a reliable estimate of the annual effective tax rate, we use the actual effective tax rate for the year-to-date period. During the first quarter of 2024, we used the actual effective tax rate approach due to the variability of the rate as a result of fluctuations in forecasted income and the effects of being taxed in multiple tax jurisdictions.
billion as of March 30, 2024 ($ billion as of December 30, 2023). For hedged investments still held at the reporting date, we recorded net losses of $ million in the first three months of 2024 ($ million of net gains in the first three months of 2023). We recorded net gains on the related derivatives of $ million in the first three months of 2024 ($ million of net losses in the first three months of 2023).Our remaining unhedged marketable debt investments are reported at fair value, with unrealized gains or losses, net of tax, recorded in accumulated other comprehensive income (loss) and realized gains or losses recorded in interest and other, net. The adjusted cost of our unhedged investments was $ billion as of March 30, 2024 ($ billion as of December 30, 2023), which approximated the fair value for these periods.
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| Financial Statements | Notes to Financial Statements | 14 |
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Due in 1–2 years | | | |
Due in 2–5 years | | | |
Due after 5 years | | | |
Instruments not due at a single maturity date1 | | | |
| Total | | $ | | |
| | $ | | | Non-marketable equity securities | | | | | | |
Equity method investments | | | | | | |
| Total | | $ | | | | $ | | |
1 Approximately % of our marketable equity securities are subject to trading-volume or market-based restrictions, which limit the number of shares we may sell in a specified period of time, impacting our ability to liquidate these investments. Certain of the trading volume restrictions generally apply for as long as we own more than % of the outstanding shares. Market-based restrictions result from the rules of the respective exchange.
) | | $ | | | | Observable price adjustments on non-marketable equity securities | | | | | | | |
Impairment charges | | () | | | () | | |
Sale of equity investments and other1 | | | | | | | |
| Total gains (losses) on equity investments, net | | $ | | | | $ | | | |
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The total notional amount of outstanding pay-variable, receive-fixed interest rate swaps was $ billion as of March 30, 2024 and December 30, 2023.
| | $ | | | | $ | | | | $ | | |
Interest rate contracts | | | | | | | | | | | | |
Total derivatives designated as hedging instruments | | $ | | | | $ | | | | $ | | | | $ | | |
Derivatives not designated as hedging instruments: | | | | | | | | |
Foreign currency contracts3 | | $ | | | | $ | | | | $ | | | | $ | | |
Interest rate contracts | | | | | | | | | | | | |
Equity contracts | | | | | | | | | | | | |
| Total derivatives not designated as hedging instruments | | $ | | | | $ | | | | $ | | | | $ | | |
| Total derivatives | | $ | | | | $ | | | | $ | | | | $ | | |
1Derivative assets are recorded as other assets, current and long-term.
2Derivative liabilities are recorded as other liabilities, current and long-term.
3A substantial majority of these instruments mature within 12 months.
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| Financial Statements | Notes to Financial Statements | 17 |
| | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | Reverse repurchase agreements | | | | | | | | | | | | | | () | | | | | |
| Total assets | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | |
| Liabilities: | | | | | | | | | | | | | |
| Derivative liabilities subject to master netting arrangements | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | |
| Total liabilities | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dec 30, 2023 |
| | | | | | | | Gross Amounts Not Offset in the Balance Sheet | | |
| (In Millions) | | Gross Amounts Recognized | | Gross Amounts Offset in the Balance Sheet | | Net Amounts Presented in the Balance Sheet | | Financial Instruments | | Cash and Non-Cash Collateral Received or Pledged | | Net Amount |
| Assets: | | | | | | | | | | | | |
| Derivative assets subject to master netting arrangements | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
| Reverse repurchase agreements | | | | | | | | | | | | | | () | | | | |
| Total assets | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
| Liabilities: | | | | | | | | | | | | |
| Derivative liabilities subject to master netting arrangements | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
| Total liabilities | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
We obtain and secure available collateral from counterparties against obligations, including securities lending transactions and reverse repurchase agreements, when we deem it appropriate.
Derivatives in Cash Flow Hedging Relationships
The before-tax net gains or losses attributed to cash flow hedges recognized in other comprehensive income (loss) were $ million net loss in the first three months of 2024 ($ million net gains in the first three months of 2023). Substantially all of our cash flow hedges were foreign currency contracts for all periods presented.
During the first three months of 2024 and 2023, the amounts excluded from effectiveness testing were insignificant.
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| Financial Statements | Notes to Financial Statements | 18 |
) | | $ | | | |
Hedged items | | | | | () | | |
| Total | | $ | | | | $ | | | | Derivatives Not Designated as Hedging Instruments
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Interest rate contracts | | Interest and other, net | | | | | () | | |
Other | | Various | | | | | | | |
| Total | | | | $ | | | | $ | | | | billion related to litigation involving VLSI and a charge of $ million related to an EC-imposed fine, both as described below. Excluding the VLSI claims, management at present believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends; however, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings, excessive verdicts, or other events could occur. Unfavorable resolutions could include substantial monetary damages, fines, or penalties. Certain of these outstanding matters include speculative, substantial, or indeterminate monetary awards. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices, or requiring other remedies. An unfavorable outcome may result in a material adverse impact on our business, results of operations, financial position, and overall trends. We might also conclude that settling one or more such matters is in the best interests of our stockholders, employees, and customers, and any such settlement could include substantial payments. Unless specifically described below, we have not concluded that settlement of any of the legal proceedings noted in this section is appropriate at this time.
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| Financial Statements | Notes to Financial Statements | 19 |
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| Financial Statements | Notes to Financial Statements | 20 |
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| Financial Statements | Notes to Financial Statements | 21 |
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| Financial Statements | Notes to Financial Statements | 22 |
We use terms throughout our document that are specific to Intel or that are abbreviations that may not be commonly known or used. Below is a list of these terms used in our document.
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| 5G | | The fifth-generation mobile network, which brings dramatic improvements in network speeds and latency, and which we view as a transformative technology and opportunity for many industries |
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| ADAS | | Advanced driver-assistance systems |
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| AI | | Artificial intelligence |
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| ASIC | | Application-specific integrated circuit |
| ASP | | Average selling price |
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| Back end services | | Includes assembly, test and packaging services |
| CCG | | Client Computing Group operating segment |
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| CODM | | Chief operating decision maker |
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| DCAI | | Data Center and Artificial Intelligence operating segment |
| EC | | European Commission |
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| EPS | | Earnings per share | | |
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| Form 10-K | | Annual Report on Form 10-K for the year ended December 30, 2023 |
| Form 10-Q | | Quarterly Report on Form 10-Q for the quarter ended March 30, 2024 |
| FPGA | | Field-programmable gate array |
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HPC | | High performance computing |
| IDM 2.0 | | Evolution of our IDM model that combines our internal factory network, strategic use of foundry capacity and our IFS business to position us to drive technology and product leadership |
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| IP | | Intellectual property |
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| MD&A | | Management's Discussion and Analysis |
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| MG&A | | Marketing, general, and administrative |
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| NAND | | NAND flash memory |
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| NEX | | Networking and Edge operating segment |
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| nm | | Nanometer |
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| R&D | | Research and development |
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| RSU | | Restricted stock unit |
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| SEC | | US Securities and Exchange Commission |
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| Smart Capital | | Our Smart Capital approach accelerates progress on our IDM 2.0 strategy. This approach is designed to enable us to adjust quickly to opportunities in the market, while managing our margin structure and capital spending. The elements of Smart Capital include capacity investments, government incentives, customer commitments, continued use of external foundries. |
| SoC | | A system on a chip, which integrates most of the components of a computer or other electronic system into a single silicon chip. We offer a range of SoC products in CCG, DCAI, and NEX. Our DCAI and NEX businesses offer SoCs across many market segments for a variety of applications, including products targeted for 5G base stations and network infrastructure |
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| US | | United States | | |
| US GAAP | | US Generally Accepted Accounting Principles |
| VIE | | Variable interest entity |
| VLSI | | VLSI Technology LLC |
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■ | ■ Desktop | ■ | ■ Other | |
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Operating Segment Revenue Summary |
▪Notebook revenue was $4.7 billion, up $1.3 billion from Q1 2023 and desktop revenue was $2.5 billion, up $582 million from Q1 2023. Notebook volume increased 39% in Q1 2024 and desktop volume increased 29% in Q1 2024 as customer inventory levels normalized compared to higher levels in Q1 2023. Notebook and desktop ASPs were roughly flat with Q1 2023.
▪Other revenue was $391 million, down $90 million from Q1 2023 primarily driven by the exit of legacy businesses.
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Segment Operating Income Summary |
Operating income increased 124% from Q1 2023, with an operating margin of 35%.
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| (In Millions) | | |
| $ | 2,645 | | | Q1 2024 Operating Income |
| 987 | | | Higher product profit primarily from higher notebook and desktop revenue |
| 285 | | | Lower period charges primarily driven by the sell-through of previously reserved inventory |
| 163 | | | Lower operating expenses driven by various cost-cutting measures |
| 154 | | | Lower period charges primarily driven by lower product sample costs |
| (124) | | | Higher unit costs primarily from increased mix of Intel 4 and Intel 7 products |
| $ | 1,180 | | | Q1 2023 Operating Income |
Data Center and AI
DCAI delivers cutting-edge workload-optimized solutions to cloud service providers and enterprises, along with silicon devices for communications service providers, network and edge, and HPC customers. Our unique capabilities enable us to help solve our customers' most complex challenges with the depth and breadth of our hardware and software portfolio, advanced packaging, and at-scale manufacturing made possible through a resilient, global supply chain. Our global customers and partners encompass cloud hyperscalers, multinational corporations, small-and medium-sized enterprises, independent software vendors, systems integrators, communications service providers, and governments.
Financial Performance
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| DCAI Operating Segment Revenue $B | | DCAI Segment Operating Income $B |
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Operating Segment Revenue Summary |
Revenue was $3.0 billion, up $135 million from Q1 2023, driven by an increase in server revenue. Server ASPs increased 25% primarily due to a lower mix of hyperscale customer-related revenue and a higher mix of high core count products. Server volume decreased 13% in Q1 2024, due to lower demand in a competitive environment and a higher mix of high core count products. | | |
Segment Operating Income Summary |
Operating income increased $460 million from Q1 2023, with an operating margin of 16%.
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(In Millions) | | |
| $ | 482 | | | Q1 2024 Operating Income |
| 429 | | | Higher product profit primarily from higher server revenue |
| 310 | | | Lower period charges primarily driven by the sell-through of previously reserved inventory and lower reserves taken |
| (279) | | | Higher server unit cost primarily from increased mix of Intel 7 products |
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| $ | 22 | | | Q1 2023 Operating Income |
Network & Edge
NEX lifts the world's networks and edge compute systems from inflexible fixed-function hardware to general-purpose compute, acceleration, and networking devices running cloud native software on programmable hardware. We work with partners and customers to deliver and deploy intelligent edge platforms that allow software developers to achieve agility and to drive automation using AI for efficient operations while securing the integrity of their data at the edge. We have a broad portfolio of hardware and software platforms, tools, and ecosystem partnerships for the rapid digital transformation happening from the cloud to the edge. We are leveraging our core strengths in process, software, and manufacturing at scale to grow traditional markets and to accelerate entry into emerging ones.
Financial Performance
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| NEX Operating Segment Revenue $B | | NEX Segment Operating Income (Loss) $B |
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Operating Segment Revenue Summary |
Revenue was $1.4 billion, down $125 million from Q1 2023 primarily due to 5G customers tempering purchases to reduce existing inventories, partially offset by higher Edge and Network revenue.
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Segment Operating Income (Loss) Summary |
Operating margin increased $253 million from Q1 2023, with an operating margin of 13%.
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(In Millions) | | |
| $ | 184 | | | Q1 2024 Operating Income (Loss) |
| 185 | | | Lower period charges driven by the sell-through of previously reserved inventory and lower reserves taken |
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| 68 | | | Other |
| $ | (69) | | | Q1 2023 Operating Income (Loss) |
Intel Foundry
Intel Foundry, comprising our Foundry Technology Development, Foundry Manufacturing and Supply Chain, and Foundry Services organizations, is on a mission to deliver the best systems foundry capabilities to our customers and reshape the world’s semiconductor industry. As the stewards of Moore’s law, we continually innovate and advance world-class silicon process and advanced packaging technologies for customers. Our systems foundry offerings are strengthened by a robust design ecosystem with key industry partners, our systems of chips capabilities, and our secure, resilient and more sustainable supply chain. Our systems foundry is built on the foundation of our silicon process and advanced packaging technology offerings and enables co-optimized solutions for our customers in the AI era. We are strengthening the resilience of the global semiconductor supply chain for leading-edge and mature node semiconductor products by investing in geographically balanced and more sustainable manufacturing capacity. As a systems foundry for the AI era, Intel Foundry brings together these critical components to help our global customers drive the next phase of technology innovation.
Financial Performance
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| Intel Foundry Operating Segment Revenue $B | | Intel Foundry Segment Operating Loss $B |
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Operating Segment Revenue Summary |
Revenue was $4.4 billion, down $462 million from Q1 2023. Intersegment revenue was $4.3 billion, down $371 million from Q1 2023, driven by lower back end services and product sample revenues. External revenue was $27 million, down $91 million from Q1 2023, driven by lower equipment sales and traditional packaging services.
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Segment Operating Loss Summary |
We had an operating loss of $2.5 billion, compared to an operating loss of $2.4 billion in Q1 2023.
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| $ | (2,474) | | | Q1 2024 Operating Loss |
| (367) | | | Lower product and services profit primarily driven by lower revenue |
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| 300 | | | Lower period charges related to excess capacity charges |
| 209 | | | Lower period charges primarily driven by lower intersegment inventory reserves taken |
| (256) | | | Higher period charges primarily related to factory start-up costs and process development costs |
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Consolidated Revenue
(Percentages in chart indicate gross margin as a percentage of total revenue)
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| $ | 5,217 | | | Q1 2024 Gross Margin |
| 1,079 | | | Higher product profit primarily from higher notebook and desktop revenue |
| 553 | | | Lower period charges driven by the sell-through of previously reserved inventory and lower reserves taken |
| 407 | | | Higher product profit primarily due to higher server revenue |
| 300 | | | Lower period charges related to excess capacity charges |
| 138 | | | Lower period charges primarily driven by a decrease in product sample costs |
| (540) | | | Lower product profit primarily from lower Altera and Mobileye revenue |
| (313) | | | Higher unit cost primarily from increased mix of Intel 7 and Intel 4 products |
| (213) | | | Higher period charges primarily related to factory start-up costs and process development costs |
| (202) | | | Other |
| $ | 4,008 | | | Q1 2023 Gross Margin |
1 Excludes intersegment activity
Consolidated Operating Expenses
Total R&D and MG&A expenses for Q1 2024 were $5.9 billion, up 10% from Q1 2023. These expenses represent 46.7% of revenue for Q1 2024 and 46.2% of revenue for Q1 2023. In support of our strategy, described in our 2023 Form 10-K, we continue to make significant investments to accelerate our process technology roadmap. This requires continued investments in R&D and focused efforts to attract and retain talent. We continue to focus on cost efficiency initiatives that may offset some of the incremental costs that may be required periodically as we continue to improve our product execution and cost structure.
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| Research and Development $B | | Marketing, General, and Administrative $B |
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(Percentages in chart indicate operating expenses as a percentage of total revenue)
Q1 2024 vs. Q1 2023
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| R&D increased by $273 million, or 7%, driven by the following: |
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| + | Higher share-based compensation and incentive-based cash compensation |
| - | The effects of various cost-cutting measures |
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Marketing, General, and Administrative |
Q1 2024 vs. Q1 2023
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| MG&A increased by $253 million, or 19%, driven by the following: |
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| + | Increase in corporate spending, primarily from higher marketing expenses |
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Restructuring and Other Charges
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| (In Millions) | | Q1 2024 | | Q1 2023 | |
| Employee severance and benefit arrangements | | $ | 129 | | | $ | (39) | | |
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| Litigation charges and other | | — | | | 77 | | |
| Asset impairment charges | | 219 | | | 26 | | |
| Total restructuring and other charges | | $ | 348 | | | $ | 64 | | |
Employee severance and benefit arrangements includes a charge of $129 million in Q1 2024 relating to actions taken to streamline operations and to reduce costs.
Asset impairment charges includes a goodwill impairment loss of $222 million in Q1 2024 related to our new Intel Foundry reporting unit. Refer to "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements for further information.
Gains (Losses) on Equity Investments and Interest and Other, Net
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(In Millions) | | Q1 2024 | | Q1 2023 | | |
| Ongoing mark-to-market adjustments on marketable equity securities | | $ | (91) | | | $ | 188 | | | |
| Observable price adjustments on non-marketable equity securities | | 24 | | | 10 | | | |
| Impairment charges | | (69) | | | (36) | | | |
Sale of equity investments and other | | 341 | | | 7 | | | |
| Total gains (losses) on equity investments, net | | $ | 205 | | | $ | 169 | | | |
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Interest and other, net | | $ | 145 | | | $ | 141 | | | |
Ongoing mark-to-market adjustments for Q1 2024 were primarily driven by our interests in Astera Labs, Inc and Montage Technology Co., Ltd; Q1 2023 was primarily related to our interest in Montage Technology Co., Ltd and others.
In Q1 2024, we recognized a $336 million initial fair value adjustment within sale of equity investments and other upon Astera Labs, Inc shares becoming marketable.
Provision for (Benefit from) Taxes
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(In Millions) | | Q1 2024 | | Q1 2023 |
| Income (loss) before taxes | | $ | (719) | | | $ | (1,158) | |
| Provision for (benefit from) taxes | | $ | (282) | | | $ | 1,610 | |
Effective tax rate | | 39.2 | % | | (139.0) | % |
In Q1 2024, we recognized a benefit from taxes as we applied our year-to-date actual effective tax rate to our year-to-date measure of ordinary income (loss) before taxes, which reflects our jurisdictional mix of ordinary income and losses.
Our provision for, or benefit from, income taxes for an interim period has historically been determined using an estimated annual effective tax rate, adjusted for discrete items, if any. Under certain circumstances where we are unable to make a reliable estimate of the annual effective tax rate, we use the actual effective tax rate for the year-to-date period. In Q1 2024, we used the actual effective tax rate approach due to the variability of the rate as a result of fluctuations in forecasted income and the effects of being taxed in multiple tax jurisdictions.
Liquidity and Capital Resources
We consider the following when assessing our liquidity and capital resources:
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| (In Millions) | | Mar 30, 2024 | | Dec 30, 2023 |
Cash and cash equivalents | | $ | 6,923 | | | $ | 7,079 | |
| Short-term investments | | 14,388 | | | 17,955 | |
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Total cash and short-term investments | | $ | 21,311 | | | $ | 25,034 | |
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| Total debt | | $ | 52,450 | | | $ | 49,266 | |
We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in the longer term. Cash generated by operations, and total cash and short-term investments as shown in the preceding table, are our primary sources of liquidity for funding our strategic business requirements. These sources are further supplemented by our committed credit facilities and other borrowing capacity and certain other Smart Capital initiatives that we have undertaken. Our short-term funding requirements include capital expenditures for worldwide manufacturing and assembly and test, including investments in our process technology roadmap; working capital requirements; and potential acquisitions, strategic investments, and dividends. Our long-term funding requirements incrementally contemplate investments in significant manufacturing expansion plans and investments to accelerate our process technology.
Our total cash and short-term investments and related cash flows may be affected by certain discretionary actions we may take with customers and suppliers to accelerate or delay certain cash receipts or payments to manage liquidity for our strategic business requirements. These actions can include, among others, negotiating with suppliers to optimize our payment terms and conditions, adjusting the timing of cash flows associated with customer sales programs and collections, managing inventory levels and purchasing practices, and selling certain of our accounts receivables on a non-recourse basis to third party financial institutions.
We expect to continue to benefit from government incentives, and any incentives above our current expectations would enable us to increase the pace and size of our IDM 2.0 investments. Conversely, incentives below our expectations would increase our anticipated cash requirements and/or potentially curtail planned investments.
In April 2024 our Board of Directors declared a quarterly dividend of $0.125 per share on the company’s common stock, which will be payable on June 1, 2024, to stockholders of record as of May 7, 2024. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.
In Q1 2024, we issued a total of $2.6 billion aggregate principal amount of senior notes for general corporate purposes, including, but not limited to, refinancing of outstanding debt and funding for working capital and capital expenditures. We also expanded both our 5-year $5.0 billion revolving credit facility agreement and our 364-day $5.0 billion credit facility agreement, to $7.0 billion and $8.0 billion, respectively, and the maturity dates were extended by one year to February 2029 and January 2025, respectively. We have other potential sources of liquidity including our commercial paper program and our automatic shelf registration statement on file with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, and other securities. Under our commercial paper program, we have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion. As of March 30, 2024, we had $793 million of commercial paper obligations outstanding. As of March 30, 2024, we had no outstanding borrowings on the revolving credit facilities.
We maintain a diverse investment portfolio that we continually analyze based on issuer, industry, and country. Substantially all of our investments in debt instruments were in investment-grade securities.
Cash flows from operating, investing and financing activities for Q1 2024 and Q1 2023 were as follows: | | | | | | | | | | | | | | |
| | Three Months Ended |
| (In Millions) | | Mar 30, 2024 | | Apr 1, 2023 |
| Net cash provided by (used for) operating activities | | $ | (1,223) | | | $ | (1,785) | |
Net cash provided by (used for) investing activities | | (2,563) | | | (8,521) | |
Net cash provided by (used for) financing activities | | 3,630 | | | 7,394 | |
| |
| Net increase (decrease) in cash and cash equivalents | | $ | (156) | | | $ | (2,912) | |
Operating Activities
Operating cash flows consist of net income adjusted for certain non-cash items and changes in certain assets and liabilities.
The decrease in cash used for operations in the first three months of 2024 was primarily driven by a lower net operating loss compared to the first three months of 2023, partially offset by certain cash unfavorable changes in working capital.
Investing Activities
Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; and proceeds from capital-related government incentives.
Cash used for investing activities was lower in the first three months of 2024 compared to the first three months of 2023, primarily due to lower purchases of short-term investments; lower additions to property, plant, and equipment; and increased proceeds from capital-related government incentives. These favorable cash impacts were partially offset by lower maturities and sales of short-term investments and certain other cash unfavorable investing activities during the first three months of 2024.
Financing Activities
Financing cash flows consist primarily of payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, and proceeds from partner contributions and equity-related issuances.
Cash provided by financing activities was lower in the first three months of 2024 compared to the first three months of 2023. This decrease was primarily due to a reduction in net proceeds from our debt and commercial paper issuances, net of commercial paper repayments; partially offset by the cash favorable impacts of reduced dividend payments in the first three months of 2024.
Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with US GAAP, this document contains references to the non-GAAP financial measures below. We believe these non-GAAP financial measures provide investors with useful supplemental information about our operating performance, enable comparison of financial trends and results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business and measuring our performance. These non-GAAP financial measures are used in our performance-based RSUs and our cash bonus plans.
Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects. Income tax effects are calculated using a fixed long-term projected tax rate of 13% across all adjustments. We project this long-term non-GAAP tax rate on an annual basis using a five-year non-GAAP financial projection that excludes the income tax effects of each adjustment. The projected non-GAAP tax rate also considers factors such as our tax structure, our tax positions in various jurisdictions, and key legislation in significant jurisdictions where we operate. This long-term non-GAAP tax rate may be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in our geographic earnings mix, or changes to our strategy or business operations. Management uses this non-GAAP tax rate in managing internal short- and long-term operating plans and in evaluating our performance; we believe this approach facilitates comparison of our operating results and provides useful evaluation of our current operating performance.
Our non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with US GAAP, and the financial results calculated in accordance with US GAAP and reconciliations from these results should be carefully evaluated.
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| Non-GAAP adjustment or measure | Definition | Usefulness to management and investors |
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| Acquisition-related adjustments | Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. Charges related to the amortization of these intangibles are recorded within both cost of sales and MG&A in our US GAAP financial statements. Amortization charges are recorded over the estimated useful life of the related acquired intangible asset, and thus are generally recorded over multiple years. | We exclude amortization charges for our acquisition-related intangible assets for purposes of calculating certain non-GAAP measures because these charges are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. These adjustments facilitate a useful evaluation of our current operating performance and comparison to our past operating performance and provide investors with additional means to evaluate cost and expense trends. |
| Share-based compensation | Share-based compensation consists of charges related to our employee equity incentive plans. | We exclude charges related to share-based compensation for purposes of calculating certain non-GAAP measures because we believe these adjustments provide comparability to peer company results and because these charges are not viewed by management as part of our core operating performance. We believe these adjustments provide investors with a useful view, through the eyes of management, of our core business model, how management currently evaluates core operational performance, and additional means to evaluate expense trends, including in comparison to other peer companies. |
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| Restructuring and other charges | Restructuring charges are costs associated with a restructuring plan and are primarily related to employee severance and benefit arrangements. Other charges include periodic goodwill and asset impairments, certain pension charges, and costs associated with restructuring activity. | We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures because these costs do not reflect our core operating performance. These adjustments facilitate a useful evaluation of our core operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends. |
| (Gains) losses on equity investments, net | (Gains) losses on equity investments, net consists of ongoing mark-to-market adjustments on marketable equity securities, observable price adjustments on non-marketable equity securities, related impairment charges, and the sale of equity investments and other. | We exclude these non-operating gains and losses for purposes of calculating certain non-GAAP measures because it provides comparability between periods. The exclusion reflects how management evaluates the core operations of the business. |
| | | | | | | | |
| (Gains) losses from divestiture | (Gains) losses are recognized at the close of a divestiture, or over a specified deferral period when deferred consideration is received at the time of closing. Based on our ongoing obligation under the NAND wafer manufacturing and sale agreement entered into in connection with the first closing of the sale of our NAND memory business on December 29, 2021, a portion of the initial closing consideration was deferred and will be recognized between first and second closing. | We exclude gains or losses resulting from divestitures for purposes of calculating certain non-GAAP measures because they do not reflect our current operating performance. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results. |
|
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| Adjusted free cash flow | We reference a non-GAAP financial measure of adjusted free cash flow, which is used by management when assessing our sources of liquidity, capital resources, and quality of earnings. Adjusted free cash flow is operating cash flow adjusted for (1) additions to property, plant, and equipment, net of proceeds from capital-related government incentives and partner contributions, and (2) payments on finance leases. | This non-GAAP financial measure is helpful in understanding our capital requirements and sources of liquidity by providing an additional means to evaluate the cash flow trends of our business. |
Following are the reconciliations of our most comparable US GAAP measures to our non-GAAP measures presented:
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| Gross margin percentage | | 41.0 | % | | 34.2 | % | |
| Acquisition-related adjustments | | 1.8 | % | | 2.8 | % | |
| Share-based compensation | | 2.3 | % | | 1.4 | % | |
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| Non-GAAP gross margin percentage | | 45.1 | % | | 38.4 | % | |
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| Earnings (loss) per share attributable to Intel—diluted | | $ | (0.09) | | | $ | (0.66) | | |
| Acquisition-related adjustments | | 0.06 | | | 0.09 | | |
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| Share-based compensation | | 0.28 | | | 0.18 | | |
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| Restructuring and other charges | | 0.08 | | | 0.01 | | |
| (Gains) losses on equity investments, net | | (0.05) | | | (0.04) | | |
| (Gains) losses from divestiture | | (0.01) | | | (0.01) | | |
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| Adjustments attributable to non-controlling interest | | — | | | — | | |
| Income tax effects | | (0.09) | | | 0.39 | | |
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| Non-GAAP earnings (loss) per share attributable to Intel—diluted | | $ | 0.18 | | | $ | (0.04) | | |
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| | Three Months Ended |
| (In Millions) | | Mar 30, 2024 | | Apr 1, 2023 |
| Net cash provided by (used for) operating activities | | $ | (1,223) | | | $ | (1,785) | |
| Net additions to property, plant, and equipment | | (4,955) | | | (6,964) | |
| Payments on finance leases | | — | | | (15) | |
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| Adjusted free cash flow | | $ | (6,178) | | | $ | (8,764) | |
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Net cash provided by (used for) investing activities | | $ | (2,563) | | | $ | (8,521) | |
Net cash provided by (used for) financing activities | | $ | 3,630 | | | $ | 7,394 | |
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Risk Factors and Other Key Information | |
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Risk Factors
The risks described in "Risk Factors" within Other Key Information in our 2023 Form 10-K could materially and adversely affect our business, financial condition, and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. Refer also to the other information set forth in this Form 10-Q, including in the Forward-Looking Statements, MD&A, and the Consolidated Condensed Financial Statements and Supplemental Details sections.
Quantitative and Qualitative Disclosures About Market Risk
We are affected by changes in currency exchange and interest rates, as well as equity and commodity prices. Our risk management programs are designed to reduce, but may not entirely eliminate, the impacts of these risks. For a discussion about market risk and sensitivity analysis related to changes in currency exchange rates, interest rates, equity prices, and commodity prices refer to "Quantitative and Qualitative Disclosures About Market Risk" within MD&A in our 2023 Form 10-K.
Controls and Procedures
Inherent Limitations on Effectiveness of Controls
Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Issuer Purchases of Equity Securities
We have an ongoing authorization, originally approved by our Board of Directors in 2005 and subsequently amended, to repurchase shares of our common stock in open market or negotiated transactions. No shares were repurchased during the quarter ending March 30, 2024. As of March 30, 2024, we were authorized to repurchase up to $110.0 billion, of which $7.2 billion remained available.
We issue RSUs as part of our equity incentive plans. In our Consolidated Condensed Financial Statements, we treat shares of common stock withheld for tax purposes on behalf of our employees in connection with the vesting of RSUs as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase program.
Rule 10b5-1 Trading Arrangements
Our directors and officers (as defined in Rule 16a-1 under the Exchange Act) may from time to time enter into plans or other arrangements for the purchase or sale of our shares that are intended to satisfy the affirmative defense conditions of Rule 10b5–1(c) or may represent a non-Rule 10b5-1 trading arrangement under the Exchange Act. During the quarter ended March 30, 2024, no such plans or arrangements were or , including by modification.
Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934
Section 13(r) of the Exchange Act requires an issuer to disclose certain information in its periodic reports if it or any of its affiliates knowingly engaged in certain activities, transactions, or dealings with individuals or entities subject to specific US economic sanctions during the reporting period, even when the activities, transactions, or dealings are conducted in compliance with applicable law. On March 2, 2021, the US Secretary of State designated the Federal Security Service of the Russian Federation (FSB) as a party subject to one such sanction. Though Intel has suspended sales in Russia, there may be a need to file documents or engage with FSB as Intel winds up our local Russian offices. All such dealings are explicitly authorized by General License 1B issued by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), and there are no gross revenues or net profits directly associated with any such dealings by us with the FSB.
On April 15, 2021, the US Department of the Treasury designated Pozitiv Teknolodzhiz, AO (Positive Technologies), a Russian IT security firm, as a party subject to one of the sanctions specified in Section 13(r). Prior to the designation, we communicated with Positive Technologies regarding its IT security research and coordinated disclosure of security vulnerabilities identified by the firm. Based on a license issued by OFAC, we resumed such communications. There are no gross revenues or net profits directly associated with any such activities. We plan to continue these communications in accordance with the terms and conditions of the OFAC license.
Exhibits
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| | | | | Incorporated by Reference | | |
Exhibit
Number | | Exhibit Description | | Form | | File Number | | Exhibit | | Filing
Date | |
Filed or Furnished Herewith |
| 3.1 | | | | 10-Q | | 000-06217 | | 3.1 | | 10/27/2023 | | |
| 3.2 | | | | 8-K | | 000-06217 | | 3.2 | | 12/5/2023 | | |
| 4.1 | | | | 8-K | | 000-06217 | | 4.1 | | 2/21/2024 | | |
10.1† | | | | 8-K | | 000-06217 | | 10.1 | | 2/16/2024 | | |
| 31.1 | | | | | | | | | | | | X |
| 31.2 | | | | | | | | | | | | X |
| | | | | | | | | |
| 32.1 | | | | | | | | | | | | X |
| 101 | | Inline XBRL Document Set for the consolidated condensed financial statements and accompanying notes in Consolidated Condensed Financial Statements and Supplemental Details | | | | | | | | | | X |
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| 104 | | Cover Page Interactive Data File - formatted in Inline XBRL and included as Exhibit 101 | | | | | | | | | | X |
† Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
Form 10-Q Cross-Reference Index
| | | | | | | | |
| Item Number | Item | |
| Part I - Financial Information | |
| Item 1. | Financial Statements | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations: | |
| Liquidity and capital resources | |
| Results of operations | |
|
|
| Critical accounting estimates | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
| Item 4. | Controls and Procedures | |
| | |
| Part II - Other Information | |
| Item 1. | Legal Proceedings | |
| Item 1A. | Risk Factors | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 3. | Defaults Upon Senior Securities | Not applicable |
| Item 4. | Mine Safety Disclosures | Not applicable |
| Item 5. | Other Information | |
|
| Rule 10b5-1 Trading Arrangements | |
| Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934 | |
| Item 6. | Exhibits | |
| | |
| Signatures | |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | | | | | | | |
| | | INTEL CORPORATION
(Registrant) |
| | | | | |
| Date: | April 25, 2024 | | By: | | /s/ DAVID ZINSNER |
| | | | | David Zinsner |
| | | | | Executive Vice President, Chief Financial Officer, and
Principal Financial Officer |
| | | | | |
| Date: | April 25, 2024 | | By: | | /s/ SCOTT GAWEL |
| | | | | Scott Gawel |
| | | | | Corporate Vice President, Chief Accounting Officer, and
Principal Accounting Officer |
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