INTEL CORP (INTC)

Management's Discussion and Analysis

Overview

We are a global designer and manufacturer of semiconductor products, including CPUs and other solutions, primarily marketed and sold through our Intel Products business and manufactured via our Intel Foundry operations and other suppliers. Our customers primarily include OEMs, ODMs, cloud service providers, and other manufacturers and service providers, such as industrial and communication equipment manufacturers and other cloud service providers who buy our products through distributor, reseller, retail, and OEM channels throughout the world. We market and sell these products directly through our global sales and marketing organizations and indirectly through channel partners. We manufacture our products at our fabrication and assembly and test facilities located throughout the world. We seek to expand our Intel Foundry business as a third-party foundry for external customers.

A Year in Review

2024 revenue was $53.1 billion, down $1.1 billion, or 2%, from 2023 due to lower all other revenue and lower Intel Foundry revenue, partially offset by higher Intel Products revenue. All other revenue decreased 32% from 2023, driven by lower Altera revenue due to customers tempering purchases to reduce existing inventories across all product lines and lower Mobileye revenue as customers tempered purchases to reduce existing inventories of EyeQ products. Intel Foundry external revenue decreased 60% from 2023 due to lower traditional packaging services and lower equipment sales. Intel Products revenue increased 3% from 2023 due primarily to higher CCG and DCAI revenue. CCG revenue increased 4% from 2023 primarily due to higher notebook volume compared to 2023 and was partially offset by lower other CCG revenue, which decreased from 2023 due to the exit of legacy businesses, and lower desktop revenue, which decreased on lower demand compared to 2023. DCAI revenue increased 1% from 2023 driven by higher server revenue primarily from high core count products, which increased ASPs and lowered volume compared to 2023.

Our consolidated results of operations in 2024 were meaningfully impacted by non-cash impairments and the acceleration of depreciation for certain manufacturing assets, restructuring charges resulting from our 2024 Restructuring Plan, non-cash impairments of goodwill and certain other assets, as well as non-cash charges related to a valuation allowance recognized against our US deferred tax assets. In 2024, we invested $16.5 billion in R&D, made gross capital investments of $25.1 billion, and had $8.3 billion in cash from operations and negative $2.2 billion of adjusted free cash flow1.

Our 2024 results reflect the continued advancement of our transformational journey. In 2024, our previously announced internal foundry operating model took effect, creating a foundry relationship between our Intel Products business (collectively CCG, DCAI, and NEX) and the Intel Foundry business (including Foundry Technology Development, Foundry Manufacturing and Supply Chain, and Foundry Services, formerly IFS). The foundry operating model is designed to reshape operational dynamics and drive greater transparency, accountability, and focus on costs and efficiency. In furtherance of our internal foundry operating model, we began separately reporting the financials for our Intel Products and Intel Foundry businesses in Q1 2024 and, in Q3 2024, we announced our intent to establish Intel Foundry as an independent subsidiary. We also made meaningful progress on our previously announced plan to operate Altera® as a standalone business beginning in Q1 2024, readying the business and paving the way for value capture opportunities in early 2025.

Restructuring

In 2024, we announced our intention to implement a series of cost and capital reduction initiatives designed to adjust our spending to current business trends while enabling our new operating model and continuing to fund investments in our core strategy—returning to product and process competitiveness. These initiatives, which we refer to as our 2024 Restructuring Plan, include reducing headcount, consolidating and reducing our global real estate footprint, conducting portfolio reviews of our businesses under a "clean sheet" view, rationalizing capital investments and deployments based upon demand signals and capacity requirements, and reducing our overall operating expenses. The headcount actions in connection with the 2024 Restructuring Plan are expected to result in an approximate 15% decrease in our core Intel workforce by early 2025. As a result of initiating and deploying our 2024 Restructuring Plan, we recognized restructuring charges of $2.8 billion in 2024.

Our 2024 consolidated results of operations were also materially impacted by the following:

■$3.3 billion of charges, substantially all of which were recorded to cost of sales, related to non-cash impairments and the acceleration of depreciation for certain manufacturing assets, a substantial majority of which related to our Intel 7 process node;

■$3.1 billion of non-cash charges associated with the impairment of goodwill for certain of our reporting units as well as certain acquired intangible assets (see "Note 7: Restructuring and Other Charges" within Notes to Consolidated Financial Statements); and

■$9.9 billion of non-cash charges recorded to provision for income taxes that substantially related to valuation allowances recorded to our net deferred tax assets (see "Note 8: Income Taxes" within Notes to Consolidated Financial Statements).

Segments and Prior Year Results

During 2024, we managed our business through the operating segments that are presented below and have included the 2024, 2023, and 2022 segment financial results and related discussions of our segments' results of operations. Our segments' results of operations presented below exclude the $7.0 billion of restructuring and other charges and $9.9 billion of charges resulting from valuation allowances recorded against our net deferred tax assets, in addition to certain other items, as our CODMs receive, view, and use information for decision-making purposes based upon segment results that exclude such items.

We have also included the 2024, 2023, and 2022 consolidated financial results and related discussions of our consolidated results of operations for 2024 relative to 2023 subsequent to the operating segment discussion below. A discussion regarding our consolidated results of operations for 2023 relative to 2022 is included in our 2023 Form 10-K. "Note 3: Operating Segments" within Notes to Consolidated Financial Statements of this Form 10-K reconciles our segment and consolidated results for each of the periods presented.

1 See "Non-GAAP Financial Measures" within MD&A.

Operating Segment Trends and Results

Intel Products

Intel Products consists substantially of the design, development, marketing, sale, support, and servicing of CPUs and related solutions for external customers. Intel Products is composed of three operating segments: CCG, DCAI, and NEX.

Client Computing Group

Market and Business Overview

Overview

We are committed to advancing PC experiences by delivering competitive products and deepening our relationships with industry partners to co-engineer and deliver leading platform innovation. We bring together the operating system, system architecture, hardware, and software application integration to enable industry-leading PC experiences. We embrace these opportunities by focusing on our roadmap, delivering innovative PC capabilities, and designing advanced PC experiences. By doing this, we believe we help fuel innovation across the industry, providing a solid source of IP, scale, and cash flow for Intel.

Market Trends and Strategy

In 2024, the PC market started to stabilize from a soft macroeconomic environment and inflationary pressures, with PC supply and demand levels beginning to normalize. We remain positive on the long-term outlook for PCs, as household density is stable to increasing, educational device penetration rates remain low outside of the US, and PC usage remains elevated compared to pre-pandemic rates1. Commercial growth opportunities also remain as corporations expand the size of their PC fleets, while also replacing older devices. Currently, more than 200 million commercial devices are more than four years old2.

We recently introduced our Intel Core Ultra processor family that serves as the CPU for the AI PC, which enables AI capabilities at the client level. We believe the AI PC is a significant potential driver of PC demand over the coming years, and believe we are well-positioned to capitalize on this trend that we expect will support a long-term PC TAM of 300 million units3.

We deliver value to our customers by leveraging our engineering capabilities and working with our partners across an open, innovative ecosystem to deliver technology that drives every major aspect of the computing experience, including performance, power efficiency, battery life, connectivity, graphics, and form factors, to create the most advanced PC platforms. We design our products with a philosophy of openness and choice, and seek to continually provide more competitive products with more capabilities for customers.

Products and Competition

In 2023, we introduced a significant update to our client compute brands to make it easier for customers to identify the right client solutions for their compute needs. Those brands include Intel, Intel Core and Intel Core Ultra. The Intel and Intel Core brands have been staples of the PC industry for nearly two decades and represented our highest volume products by unit sales in 2024. These products are designed to serve a broad cross-section of the customer and computing needs in the client market.

The Intel Core Ultra processor family, which we launched at the end of 2023, delivers significant advancements in graphics, AI, and multi-threaded CPU performance and introduced the AI PC to the market. In the second half of 2024, the next-generation Intel Core Ultra 200V Series became our highest performance client processors, with increased battery life for mobile PCs. We also introduced the Intel Core Ultra 200S Series processors, catering to the desktop enthusiast market. We remain committed to delivering the most advanced processing power to support the growing demands of AI, graphics, and multi-threaded workloads.

We operate in a particularly competitive market. In processors, we compete with Advanced Micro Devices, Inc. (AMD) and vendors who design applications processors based on ARM architecture, such as Apple Inc. (Apple) with its M series products and Qualcomm Inc. (Qualcomm) with its Snapdragon product. We expect this competitive environment to continue to intensify in 2025.

We remain committed to creating an open ecosystem to foster growth and technology innovations. We embrace and collaborate with a global ecosystem of industry partners to deliver competitive technologies together.

1 Source: Intel calculated PC density from industry analyst reports.

2 Source: Intel calculated volume of devices over four years old from industry analyst reports and internal data.

3 Source: Intel calculated multi-year TAM forecast derived from industry analyst reports.

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Data Center and AI

Market and Business Overview

Overview

DCAI delivers innovative 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. Our global customers and partners encompass cloud hyperscalers, multinational corporations, small-and medium-sized enterprises, independent hardware and software vendors, systems integrators, communications service providers, and governments.

Market Trends and Strategy

Data is a significant force in society and is generated daily at an unprecedented pace. The desire to harness insights from data to drive better outcomes for businesses and society is ever expanding. AI is becoming pervasive in nearly all applications, creating the potential for intelligence everywhere, and enabling powerful new uses of compute resources across all market segments. We believe we benefit from the significant installed base of Intel Xeon processors, and we are seeking to expand our portfolio of heterogeneous compute solutions (IPUs, AI accelerators, and future GPUs) to more fully participate in this high-growth area. DCAI is focused on the AI ecosystem, developer tools, frameworks, networking and memory, technologies, and open standards to drive a scalable path forward. We take a system-level approach that supplies the necessary hardware and software optimized for power and performance. Our technology is differentiated at the system level and in high-growth workloads based on our integrated hardware acceleration engines and software. For example, architected into our Intel Xeon processors are Intel® Advanced Matrix Extensions (Intel® AMX) for AI acceleration; Intel® Software Guard Extensions (Intel® SGX), providing enclaves of protected memory designed to deliver enhanced security for sensitive data; and Intel® Crypto Acceleration, which is designed to deliver breakthrough performance across cryptographic algorithms. We believe this acceleration and performance will continue to drive our differentiated value and growth across our customer base.

Products and Competition

Our products and services include:

We provide our customers with an extensive portfolio of silicon and software products, engineered to deliver workload-optimized performance. Our hardware portfolio primarily comprises CPUs and also includes accelerators, all designed to support the performance, agility, and security that our customers demand. Deployment of our silicon platforms is accelerated by a software development environment that enables workload mobility across our heterogeneous architectures and enables developers to execute their workloads on the hardware that best meets application requirements.

Our competitors include hardware vendors such as AMD that compete with us across the full spectrum of CPUs, GPUs, accelerators, and other products; providers of GPU systems such as NVIDIA; companies developing their own custom silicon; and new entrants and incumbents developing ARM- and RISC-V-based products customized for specific data center workloads. We expect this competitive landscape to continue to evolve.

The Intel Xeon Scalable processor family delivers advanced CPUs for the data center, the network, and the edge, driving performance, manageability, and security with differentiated features and capabilities. In 2024, we launched the Intel Xeon 6 processors with Efficient-cores (or E-Cores) and Performance-cores (or P-cores). Our E-core processors feature single-threaded cores for scale-out, parallel workloads, while our P-core processors feature hyperthreaded cores and built-in matrix engines that are designed for more compute-intensive workloads such as AI.

Our AI processor offerings consist of our Gaudi AI accelerators. In 2024, we launched the Intel Gaudi 3 AI accelerators with enhanced memory bandwidth, flexibility, and AI compute capabilities. We were developing Falcon Shores as our next-generation AI accelerator to succeed the Gaudi product line; however, based on customer feedback we will utilize it as an internal test chip rather than bring it to market. We are focusing our efforts on the development of our Jaguar Shores AI accelerator, previously targeted to succeed Falcon Shores, as our first generally programmable GPU AI accelerator offering to customers.

The ubiquity of Intel Xeon processors in the installed base, along with our heterogeneous compute solutions combined with software that unlocks the value of our hardware, enable our customers to develop highly differentiated solutions. Our integrated approach has created significant value for Intel, our customers, and our partners by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities to apply our technology to address our customers' and society's most complex issues.

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Network and Edge

Market and Business Overview

Overview

NEX aims to transform the world's networks and edge compute systems from 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 developers to achieve agility and 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 compute, connectivity, software, and manufacturing at scale to grow traditional markets and to accelerate entry into emerging ones.

Market Trends and Strategy

The Internet is undergoing a shift toward a cloud-to-edge infrastructure, combining unrivaled scale and capacity in the cloud with faster response times at nearby edges. As AI is transforming and automating every industry—from factories to smart cities to hospitals—the demand for high-performance computing at the edge has expanded exponentially. Networks are moving toward software, becoming more programmable and flexible.

Our network and edge solutions aim to unleash the power of intelligent edge solutions for our customers and move the world's networks to a software infrastructure that runs on Intel technologies by providing edge-optimized, AI-enabled compute and connectivity solutions to run every workload at the edge, between the cloud and the end user, and deploying software platforms that enable developers to build, deploy, run, manage, connect, and secure distributed edge infrastructure, applications, and edge AI across several verticals, such as industrials, federal, aerospace, retail, healthcare, education, and smart cities.

Products

With a greater emphasis on systems and solutions designed to harness the growth of data processed at the edge to yield insights, our competitive landscape has shifted beyond application-specific standard product vendors to include cloud, network, and AI computing platform providers.

Today, we speed the deployment of network and edge computing solutions based on our open software frameworks, AI-enabled platform solutions, and edge and network-optimized broad silicon portfolio to address a wide range of applications across several markets.

On-Premises Edge: More than just providing silicon, we partner with companies to design and deliver solutions to help a wide range of customers transform their businesses and take advantage of the rapidly increasing number of connected and intelligent devices. We develop high-performance, AI-enabled compute platforms that solve for technology and business use cases that scale across several industries, such as retail, education, manufacturing, energy, healthcare, and medical.

We deliver edge-optimized AI-enabled platforms for edge applications based on our Intel Xeon, Intel Core, and Intel Atom® processor portfolio, which reduces operational complexity for our customers and helps our customers create, store, and process data at the edge so they can analyze it faster and act on it sooner. We also build differentiated networking offerings that keep pace with industry speeds and deliver unique features needed for the intelligent edge, such as networking offloads, time-sensitive networking, and scalable reliable transport.

Enterprise Networking: Enterprises are evolving their networks to connect new and varying environments, host services from anywhere between cloud and edge, deliver heightened service levels, and handle growing volumes of devices and data. We are leading the world's shift to run networking workloads in software and create network function virtualization to provide our customers with more efficient, cost-effective, and programmable platforms that enable secure, agile, and reliable networking solutions from edge to cloud. We work with our ecosystem partners of over 500 network builders to help enterprises optimize their networks with right-sized compute and connectivity requirements for current and future needs.

Telecommunication Networks: We lead 5G core network deployments, demonstrating that 5G base stations can be almost entirely built from software running on Intel Xeon processors with Intel® vRAN Boost. We continue to drive the transformation from fixed-function networks onto Intel Xeon Scalable processors and Intel Xeon D processors coupled with our FlexCore and FlexRAN™ software. Our customers are tier-one global communication service providers and their equipment suppliers. Our software-based cloud RAN platform is designed to allow operators to deploy the fastest cloud-native 5G infrastructure quickly and efficiently at scale to meet the needs of their end customers.

Cloud Networking: Our cloud customers require uncompromised data center network performance and reliability driven by increased networking investments to support AI cluster deployments. We address these requirements by providing our open-standards-based NICs and IPUs. The IPU, a new class of product, is an open and programmable compute platform that frees up more compute cycles for customers by running infrastructure workloads in a separate, secure, and isolated set of CPU cores.

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Intel Products Financial Performance1

1 Operating segment results include intersegment financial activity; refer to "Note 3: Operating Segments" for a reconciliation between our operating segment and consolidated financial results for the periods presented.

Operating Segment Revenue Summary

2024 vs. 2023

Total Intel Products revenue was $48.9 billion in 2024, up $1.3 billion from 2023.

▪CCG revenue increased $1.0 billion from 2023. Notebook revenue was $19.1 billion in 2024, up $2.1 billion from 2023. Notebook volume increased 12% from 2023, as customer inventory levels improved compared to higher levels in 2023. Notebook ASPs were roughly flat with 2023. Desktop revenue was $9.7 billion, down $516 million from 2023. Desktop volume decreased 5% from 2023, primarily due to lower demand compared to 2023. Desktop ASPs were roughly flat with 2023. Other CCG revenue was $1.6 billion, down $530 million from 2023, primarily driven by the exit of legacy businesses.

▪DCAI revenue increased $182 million from 2023, primarily driven by an increase in server revenue. Server ASPs increased 12% from 2023, primarily due to a higher mix of high core count products. Server volume decreased 10% from 2023, due to lower demand in a competitive environment and a higher mix of high core count products.

▪NEX revenue increased $68 million from 2023, primarily driven by higher Network and Edge revenue, partially offset by 5G customers tempering purchases to reduce existing inventories.

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2023 vs. 2022

Total Intel Products revenue was $47.7 billion in 2023, down $9.4 billion from 2022.

▪CCG revenue decreased $2.5 billion from 2022. Notebook revenue was $17.0 billion, down $1.8 billion from 2022. Notebook volume decreased 5% from 2022, driven by lower demand across market segments, partially offset by increased volume in the second half of 2023 as customer inventory levels normalized compared to higher levels in the first half of 2023. Notebook ASPs decreased 5% from 2022 due to relative strength in the education market segment resulting in a higher mix of small core products combined with a higher mix of older generation products. Desktop revenue was $10.2 billion, down $495 million from 2022. Desktop volume decreased 9% from 2022, driven by lower demand across market segments, partially offset by increased volume in the second half of 2023 as customer inventory levels normalized compared to higher levels in the first half of 2023. Desktop ASPs increased 5% from 2022, due to an increased mix of product sales to the commercial and gaming market segments. Other CCG revenue was $2.1 billion, down $229 million from 2022, primarily driven by the continued ramp down of our legacy smartphone modem business and lower demand for our wireless and connectivity products as a result of lower notebook volumes.

▪DCAI revenue decreased $4.2 billion from 2022, driven by a decrease in server revenue. Server volume decreased 37% from 2022, due to lower demand in a softening CPU data center market. Server ASPs increased 20% from 2022, primarily due to a lower mix of hyperscale customer-related revenue and a higher mix of high core count products.

▪NEX revenue decreased $2.6 billion from 2022, as customers tempered purchases to reduce inventories and adjust to a lower demand environment across product lines.

Operating Segment Cost of Sales and Operating Expenses Summary

2024 vs. 2023

Cost of Sales

Total Intel Products cost of sales was $23.8 billion in 2024, down $303 million from 2023.

▪CCG cost of sales decreased $37 million from 2023, primarily driven by lower samples and lower cost of sales due to the exit of legacy businesses. These decreases were substantially offset by higher cost of sales due to higher unit cost from an increased mix of Intel 4 and Intel 7 products and higher notebook volume sold in 2024.

▪DCAI cost of sales increased $372 million from 2023, primarily driven by higher period charges due to $922 million in Gaudi AI accelerator inventory-related charges recognized in 2024, and higher server unit cost primarily driven by an increased mix of Intel 7 products sold in 2024. These cost of sales increases were partially offset by lower period charges driven by the sell-through of previously reserved inventory and lower non-accelerator inventory reserves taken in 2024.

▪NEX cost of sales decreased $638 million from 2023, primarily driven by lower period charges from the sell-through of previously reserved inventory and lower reserves taken in 2024.

Operating Expenses

Total Intel Products operating expenses were $11.9 billion, down $267 million from 2023.

▪CCG operating expenses decreased $338 million from 2023, primarily driven by intersegment credits and various cost-reduction measures taken in 2024.

▪DCAI operating expenses increased $92 million from 2023, primarily driven by increased product development costs in 2024, partially offset by various cost-reduction measures taken in 2024.

▪NEX operating expenses were roughly flat with 2023.

2023 vs. 2022

Cost of Sales

Total Intel Products cost of sales was $24.1 billion in 2023, down $3.6 billion from 2022.

▪CCG cost of sales decreased $2.2 billion from 2022, primarily driven by lower period charges from the sell-through of previously reserved inventory and lower reserves taken in 2023, and lower notebook and desktop sales volume. These decreases in cost of sales were partially offset by higher unit costs primarily from an increased mix of Intel 7 products sold in 2023.

▪DCAI cost of sales decreased $661 million from 2022, primarily driven by lower server sales volume, lower sample costs, and lower period charges from the sell-through of previously reserved inventory and lower reserves taken in 2023. These cost of sales decreases were partially offset by higher unit cost primarily from an increased mix of Intel 7 products sold in 2023.

▪NEX cost of sales decreased $761 million from 2022, driven by lower sales volume across product lines, partially offset by higher period charges driven by inventory reserves taken in 2023.

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Operating Expenses

Total Intel Products operating expenses were $12.2 billion in 2023, down $3.1 billion from 2022, primarily driven by various cost-reduction measures across all of our Intel Products operating segments.

▪CCG operating expenses decreased $1.6 billion from 2022.

▪DCAI operating expenses decreased $982 million from 2022.

▪NEX operating expenses decreased $546 million from 2022.

Intel Foundry

Market and Business Overview

Overview

Intel Foundry, comprising technology development, manufacturing and foundry services, seeks to deliver the best systems foundry capabilities to support Intel Products and external customers. As the stewards of Moore's Law, we aim to continue to innovate and advance world-class silicon process and advanced packaging technologies. Our foundry offerings benefit from several key advantages: our robust design ecosystem with key industry partners; our systems of chips capabilities; and our secure, resilient, and sustainable supply chain. Our foundry is built on the foundation of our silicon process and advanced packaging technology offerings and enables co-optimized solutions for 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 foundry for the AI era, Intel Foundry brings together these critical components to help drive the next phase of technology innovation.

Market Trends and Strategy

AI is driving transformational changes in the global market for semiconductors. AI demands an ever-increasing amount of computation performance and an ever-increasing need for power efficiency. To deliver the step function changes in performant yet efficient and cost-effective systems required to enable AI, a generational shift in computer architectures is underway, built on smaller, more efficient and performant transistors. Architectures are shifting from general monolithic silicon chips to systems of interconnected chiplets optimized for specific workloads and market segments, requiring more advanced packaging technologies to stitch together these increasingly complex designs. The global semiconductor industry and our customers are changing the way they build chips and systems while simultaneously redesigning their supply chains to be more resilient and sustainable.

Over time, the capital intensity of leading-edge semiconductor manufacturing has grown meaningfully and forced most manufacturers to give up the pursuit of Moore’s Law as they lacked sufficient scale to drive a positive return on investments in the next-generation process technology. Currently, we believe we are only one of three manufacturers pursuing 2nm lithography. Leading-edge foundries seek to amortize their leading-edge investments over many years. In early years, they seek to maximize volume and pricing on leading-edge designs that benefit from the most performant transistors. In later years, when the once advanced process technology becomes a mature technology, ease of design and manufacturing cost become more paramount.

Our strategy builds on our history of developing leading-edge semiconductor technologies for our products. While we expect our manufacturing facilities to continue to mostly produce our own products for many years to come, we are aiming to become a major provider of semiconductor manufacturing solutions for third parties as well. As we pursue that strategy, the volume from our own products helps provide the significant scale required for leading-edge foundry operations and helps derisk our foundry offerings for our third-party customers. The addition of third-party customers would, on the leading edge, help provide further scale to support our foundry operations and, for process nodes that are mature, enable better monetization of our technology and manufacturing facility investments. We plan to create greater independence for our foundry operations by establishing Intel Foundry as an independent subsidiary. We expect this to provide Intel Foundry with clearer separation and independence for foundry customers and suppliers and increase our flexibility to evaluate separate sources of funding and capital structures for our foundry and product businesses.

Products, Services, and Competition

Intel Foundry combines technology, manufacturing, supply chain, and systems capabilities to enable systems to be optimized for their workloads while providing resilience and sustainability in the supply chain. Intel Foundry aims to deliver leading-edge process technology and to build out offerings of mature process nodes for third parties. Our factory network provides geographically balanced manufacturing capacity. Intel Foundry enables Intel Products and external customers to benefit from our advanced technologies, systems capabilities, and manufacturing network, and we expect to achieve volume production of products on our 2nm node, Intel 18A, in 2025.

We seek to address the transformational shift in the semiconductor industry being driven by AI and the demand for ever-increasing computation power by providing leading foundry capabilities to support Intel Products and external customers, delivered from a resilient, secure, and more sustainable supply chain. Intel Foundry's offerings are foundational and consist of advanced process technologies enabled by an ecosystem of electronic design automation tools, intellectual property, and design services from vendors used by our external customers. This ecosystem enables external customers to design with Intel technologies as they would with other foundries. The systems of chips capabilities include architecture, advanced packaging technologies, software, and services to accelerate time to market, and driving standards to improve system performance and power consumption.

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Intel Foundry's process technologies available to external customers are expected to include our upcoming Intel 18A process featuring RibbonFET (gate-all-around) and PowerVia (back-side power delivery) as expected industry firsts; our new Intel 3 process using EUV lithography; our established Intel 7 and Intel 16 process technologies; and a new 12nm foundry process technology we are developing in collaboration with United Microelectronics Corporation (UMC). We announced an extension to our leading-edge roadmap beyond Intel 18A with the introduction of Intel 14A. Intel Foundry's advanced semiconductor assembly and test offerings include families of advanced technologies for packaging single chips or combining multiple chips together in a package, adjacent to each other, stacked on top of each other, or through a combination thereof. In addition to our core packaging technologies, we have differentiated capabilities to design and produce complex packaged parts with optimal performance, power, and cost at high yield. We continue to drive the technologies, capabilities, and standards needed to optimize systems of chips, including the Universal Chiplet Interconnect Express* standard for communication between chips in a system, which we demonstrated in silicon in 2023. We aim to accelerate our customers' designs by providing advanced technologies, services, and systems software that leverage Intel's deep knowledge as a systems company.

The competitors to Intel Foundry are primarily semiconductor foundries that focus on delivering wafers and packaging technologies from fabrication plants based primarily in Asia, and include TSMC, Samsung, Global Foundries, UMC, and Semiconductor Manufacturing International Corporation (SMIC). We compete with TSMC and Samsung in the advanced process technology marketplace.

Intel Foundry Financial Performance1

1 Operating segment results include intersegment financial activity; refer to "Note 3: Operating Segments" for a reconciliation between our operating segment and consolidated financial results for the periods presented.

Operating Segment Revenue Summary

2024 vs. 2023

Revenue was $17.5 billion, down $1.4 billion from 2023. Intersegment revenue was $17.2 billion, down $799 million from 2023, driven primarily by lower intersegment ASPs, lower back-end services revenue, and higher intersegment credits. These intersegment decreases were partially offset by higher wafer volume primarily from Intel 3, Intel 4, and Intel 7 products. External revenue was $385 million, down $568 million from 2023, driven primarily by lower traditional packaging services and lower equipment sales.

2023 vs. 2022

Revenue was $18.9 billion, down $8.6 billion from 2022. Intersegment revenue was $18.0 billion, down $9.1 billion from 2022, driven primarily by lower intersegment volume. External revenue was $953 million, up $479 million from 2022, driven primarily by higher traditional packaging services revenue.

Operating Segment Cost of Sales and Operating Expenses Summary

2024 vs. 2023

Cost of Sales

Cost of sales was $25.6 billion in 2024, up $4.1 billion from 2023, primarily driven by higher period charges related to non-cash impairments and accelerated depreciation of $3.3 billion for certain manufacturing assets, a substantial majority of which related to our Intel 7 process node; higher intersegment cost of goods sold of $1.3 billion primarily driven by higher sales volume and higher costs from the ramp of advanced technologies; and higher period charges primarily related to factory start-up costs. These cost of sales increases in 2024 were partially offset by certain other lower period expenses, primarily related to reduced excess capacity charges in 2024, lower intersegment inventory reserves taken in 2024, and a 2024 benefit recognized under the CHIPS Act.

Operating Expenses

Operating expenses were $5.4 billion, up $961 million from 2023, primarily driven by increased investments in process technology.

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2023 vs. 2022

Cost of Sales

Cost of sales was $21.5 billion in 2023, down $6.6 billion from 2022, substantially driven by lower intersegment cost of goods sold of $6.7 billion from lower sales volume and a decrease in factory start-up costs. These cost of sales decreases were partially offset by $695 million of higher period charges in 2023, primarily related to excess capacity charges and higher intersegment inventory reserves taken in 2023.

Operating Expenses

Operating expenses were $4.4 billion, down $214 million from 2022, driven by various cost-reduction measures.

All Other

Our "all other" category includes the results of operations from other non-reportable segments not otherwise presented, including our Altera and Mobileye businesses, start-up businesses that support our initiatives, and historical results of operations from divested businesses. Altera offers programmable semiconductors, primarily FPGAs, and related products, for a broad range of applications across our embedded, communications, and cloud and enterprise market segments. We previously announced the organization of Altera as a standalone business. We are pursuing monetization opportunities with Altera and remain focused on selling a stake in the business on its path to a potential IPO in the coming years. Mobileye is a global leader in driving assistance and self-driving solutions, with a product portfolio designed to encompass the entire stack required for assisted and autonomous driving, including compute platforms, computer vision, and machine learning-based perception, mapping and localization, driving policy, and active sensors in development.

All Other Financial Performance1

1 Operating segment results include intersegment financial activity; refer to "Note 3: Operating Segments" for a reconciliation between our operating segment and consolidated financial results for the periods presented.

Operating Segments Revenue Summary

2024 vs. 2023

All other revenue was $3.8 billion, down $1.8 billion from 2023. Altera revenue was $1.5 billion, down $1.3 billion from 2023 as customers tempered purchases to reduce existing inventories across all product lines. Mobileye revenue was $1.7 billion, down $425 million from 2023 as customers tempered purchases to reduce existing inventories of EyeQ products.

2023 vs. 2022

All other revenue was $5.6 billion, up $78 million from 2022. Altera revenue was $2.9 billion, up $314 million from 2022, driven by improved external supply, which enabled the fulfillment of customer backlog. Mobileye revenue was $2.1 billion, up $210 million from 2022, due to higher demand for EyeQ products. These 2023 increases were partially offset by a decrease in revenue from our remaining non-reportable segments and start-up businesses.

Operating Segments Cost of Sales and Operating Expenses Summary

2024 vs. 2023

Cost of Sales

Total all other cost of sales was $1.8 billion, down $644 million from 2023 primarily driven by lower 2024 revenue from Altera and Mobileye.

Operating Expenses

All other operating expenses were $2.1 billion, roughly flat with 2023.

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2023 vs. 2022

Cost of Sales

All other cost of sales was $2.5 billion, up $50 million from 2022 primarily driven by higher 2023 revenue from Altera and Mobileye.

Operating Expenses

All other operating expenses were $2.1 billion, up $123 million from 2022 primarily driven by higher Mobileye research and development expenditures and operating costs from our remaining non-reportable segments and start-up businesses.

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Consolidated Results of Operations

The following discussion includes the 2024, 2023, and 2022 consolidated financial results and related discussion of our consolidated results of operations for 2024 relative to 2023. A discussion regarding our consolidated results of operations for 2023 relative to 2022 is included in our 2023 Form 10-K. Our consolidated results exclude all intersegment transactions.

Consolidated Revenue

Consolidated Revenue Walk $B1

2024 vs. 2023

2024 revenue was $53.1 billion, down $1.1 billion, or 2%, from 2023 due to lower all other revenue and lower Intel Foundry revenue, partially offset by higher Intel Products revenue. All other revenue decreased 32% from 2023, driven by lower Altera revenue due to customers tempering purchases to reduce existing inventories across all product lines and lower Mobileye revenue as customers tempered purchases to reduce existing inventories of EyeQ products. Intel Foundry external revenue decreased 60% from 2023 due to lower traditional packaging services and lower equipment sales. Intel Products revenue increased 3% from 2023 due primarily to higher CCG and DCAI revenue. CCG revenue increased 4% from 2023 primarily due to higher notebook volume compared to 2023 and was partially offset by lower other CCG revenue, which decreased from 2023 due to the exit of legacy businesses, and lower desktop revenue, which decreased on lower demand compared to 2023. DCAI revenue increased 1% from 2023 driven by higher server revenue primarily from high core count products, which increased ASPs and lowered volume compared to 2023.

1 Excludes intersegment revenue; totals may not sum due to rounding

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Consolidated Gross Margin

We derived a majority of our consolidated gross margin in 2024, and 2023 from our Intel Products business sales through our CCG, DCAI, and NEX operating segments.

2024 vs. 2023

Our consolidated gross margin in 2024 decreased by $4.4 billion, or 20%, compared to 2023 due primarily to higher 2024 impairment charges and accelerated depreciation. During Q3 2024, we concluded that our manufacturing asset portfolio, primarily for our Intel 7 process node, exceeded manufacturing capacity requirements. Upon completing an asset re-use assessment, we impaired certain construction-in-progress assets and accelerated depreciation for certain in-use manufacturing assets that resulted in $3.3 billion of charges in 2024. Our 2024 gross margin also decreased due to lower revenue, higher unit cost primarily from an increased mix of Intel 4 and Intel 7 products, higher period charges due to $922 million in Gaudi AI accelerator inventory-related charges recognized in 2024, and higher factory start-up costs. These 2024 unfavorable gross margin impacts were partially offset by certain favorable gross margin movements in 2024, including lower period charges driven by the sell-through of previously reserved inventory and lower non-accelerator reserves taken, lower period charges related to excess capacity charges, and a benefit recognized for government incentives received under the CHIPS Act.

We are making capital investments in furtherance of our strategy. As of December 28, 2024, our capital investments classified as construction in progress totaled $50.4 billion ($43.4 billion as of December 30, 2023). These assets have not yet been placed into service and have not yet begun depreciating. As these construction-in-progress assets are placed into service, we expect to incur depreciation expense that impacts future production costs and, ultimately, cost of sales. To the extent we are unable to grow our revenues to offset these production costs, our gross margin and operating income will be unfavorably affected. Additionally, we could incur asset impairments on property, plant, and equipment assets if our strategy is not successful.

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Operating Expenses

Total R&D and MG&A expenses for 2024 were $22.1 billion, up 2% compared to 2023. These expenses represent 41.5% of revenue for 2024 and 40.0% of revenue for 2023. In support of our strategy, we continue to make significant investments to accelerate our process technology roadmap. As a result of our 2024 Restructuring Plan and related cost-reduction measures, we expect a decrease in total R&D and MG&A expenses in future periods as we focus investments in R&D and create capacity for sustained investment in technology and manufacturing.

Research and Development

Marketing, General, and Administrative

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Restructuring and Other Charges

In Q3 2024, the 2024 Restructuring Plan was announced, subsequently approved and committed to by our management team, and initiated to implement cost-reduction measures, including reductions in employee headcount, other operating expenditures, and capital expenditures (see "Note 7: Restructuring and Other Charges" within Notes to Consolidated Financial Statements). We expect that our 2024 Restructuring Plan, in conjunction with other initiatives, will reduce our cost structure while we continue our investments to develop, manufacture, market, sell, and deliver product and process initiatives in furtherance of our strategy. We expect actions pursuant to the 2024 Restructuring Plan to be substantially completed by the fourth quarter of 2025, which is subject to change. Any changes to the estimates or timing will be reflected in our results of operations.

Employee severance and benefit arrangements includes net charges relating to the 2024 Restructuring Plan of $2.2 billion in 2024. Charges relating to other actions taken to streamline operations and to reduce costs were $294 million in 2024. The charges in 2023 and 2022 primarily related to the 2022 Restructuring Program, which was approved to rebalance our workforce and operations in alignment with our strategy and was completed in Q1 2024. The 2022 Restructuring Program, in conjunction with other initiatives, reduced our cost structure and allowed us to reinvest certain of these cost savings in resources and capacity to develop, manufacture, market, sell, and deliver our products in furtherance of our strategy.

Litigation charges and other includes a charge of $780 million that we recorded in 2024 arising out of the R2 litigation. In 2023, a $1.2 billion benefit was recorded due to the reduction in the previously accrued charge as a result of developments in the VLSI litigation. 2023 charges also included a $401 million charge for an EC-imposed fine and a $353 million termination fee in connection with our inability to timely obtain required regulatory approvals needed to acquire Tower Semiconductor Ltd. Refer to "Note 19: Commitments and Contingencies" within Notes to Consolidated Financial Statements for information about litigation related items.

Asset impairment charges in 2024 includes non-cash charges associated with the 2024 Restructuring Plan, including $442 million of non-cash impairments of construction-in-progress assets associated with our decision to exit and outsource manufacturing capabilities for certain internal test hardware; and $103 million of non-cash impairments of operating leased assets and related leasehold improvements resulting from real estate consolidations and exits. Real estate consolidations and exits did not significantly change our operating lease liabilities and may result in future cash outlays for facility restoration or the relocation of operations. In addition, we incurred non-cash impairments relating to goodwill and acquired intangible assets of $3.1 billion in 2024. Refer to "Note 11: Goodwill" and "Note 7: Restructuring and Other Charges" within Notes to Consolidated Financial Statements for further information about these items.

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Gains (Losses) on Equity Investments and Interest and Other, Net

1    Unrealized gains (losses) on non-marketable investments includes observable price adjustments and our share of equity method investee gains (losses) and certain distributions.

Gains (Losses) on Equity Investments, Net

In 2024, we recognized net gains on equity investments of $242 million primarily due to $460 million of net gains related to our marketable equity investment portfolio, the majority of which related to the sale of our interest in Astera Labs and is within realized gains (losses) on sales of equity investments, net.

In 2023, we recognized net gains on equity investments of $40 million primarily due to $213 million of net gains related to our marketable equity investment portfolio, substantially all of which is within realized gains (losses) on sales of equity investments, net.

Interest and Other, Net

In 2024, interest and other, net decreased primarily due to higher interest expense due to higher 2024 average borrowings and lower other, net. Included in other, net in 2024 is a loss of $755 million from the change in fair value of a non-designated derivative related to our assessed probability of paying construction-related liquidated damages to Apollo, our Ireland SCIP partner. In 2024, we also received and recognized $560 million as a benefit to other, net for interest in relation to the European Commission competition matter for which we recorded and paid a ruling amount to the European Commission in 2009 and that we were successful at challenging and overturning with the ruling amount refunded to us in 2022.

Provision for (Benefit from) Taxes

Our effective tax rate increased in 2024 compared to 2023, primarily driven by the effects associated with the establishment of a valuation allowance against our US federal deferred tax assets in 2024. We assess the recoverability of our deferred tax assets quarterly, weighing available positive and negative evidence. As a result of our assessment in the third quarter of 2024, we determined it was more likely than not that the deferred tax assets will not be recoverable based upon our three-year cumulative historical loss position as of the third quarter of 2024, largely resulting from the asset impairment and restructuring and other charges incurred during the third quarter of 2024. Additionally, our 2024 provision for taxes and 2023 benefit from taxes included R&D tax credits, which provide a tax benefit based on our eligible R&D spending and are not dependent on lower income before taxes.

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Liquidity and Capital Resources

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 table below, 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, including our Ireland SCIP transaction that closed in the second quarter of 2024 that resulted in $11.0 billion of net cash inflows to us (see "Note 4: Non-Controlling Interests" within Notes to Consolidated Financial Statements). Our short-term funding requirements include capital expenditures for worldwide manufacturing and assembly and test, including investments in our process technology roadmap; investments in our product roadmap; working capital requirements, including cash outlays associated with the 2024 Restructuring Plan; partner distributions to our non-controlling interest holders; and strategic investments. We expect reductions in operating expenditures, capital expenditures, and cost of sales after implementing our 2024 Restructuring Plan and related cost-reduction measures, including reductions in headcount, which are designed to enable further operational efficiency and agility and create capacity for sustained investment in technology and manufacturing competitiveness. Our long-term funding requirements incrementally contemplate investments in significant manufacturing expansion plans and investments to accelerate our process technology. These plans include expanding existing operations in Arizona, New Mexico, and Oregon, and investing in a new leading-edge manufacturing facility in Ohio. They may also include longer-term projects, certain of which we have currently put on hold or slowed the completion of, including a new leading-edge manufacturing facility, a new assembly and test facility, and a new advanced packaging facility, among others.

We entered into government incentive arrangements with the US federal government pursuant to the CHIPS Act. In September 2024, we were awarded up to $3.0 billion in direct funding for the Secure Enclave program to expand the trusted manufacturing of leading-edge semiconductors for the US government. In November 2024, we signed a Direct Funding Agreement with the US Department of Commerce for the award of $7.9 billion in government incentives pursuant to the CHIPS Act, and we received $1.1 billion of cash in 2024 and have received an additional $1.1 billion of cash in 2025. We expect to continue to benefit from government incentives, though recent US government actions create uncertainty as to the receipt of awards under our existing CHIPS Act agreements and the potential for future awards in the US. These incentives typically require that we make significant capital investments in new facilities or expand existing facilities and our related workforce. To the extent we delay or cancel any such projects or otherwise are unable or fail to comply with the terms of the agreements, there may be a delay in our receipt of, or we may forfeit or be required to repay, the associated government incentives.

We expect to adjust the cadence of our investments based on the execution of our roadmap and changing business conditions. As of December 28, 2024, we had commitments for capital expenditures of $14.0 billion for 2025 and had $6.0 billion in capital expenditures committed in the long term. As of December 28, 2024, other purchase obligations and commitments in 2025 under our binding commitments for purchases of goods and services were $2.1 billion, with an additional $4.9 billion committed in the long term.

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services. For example, see: "Note 4: Non-Controlling Interests" within Notes to Consolidated Financial Statements for information about our SCIP arrangements and variable distribution payments that we expect to make to our co-investment partners, including liquidated damage provisions should we fail to meet certain construction milestones or operational metrics; "Note 19: Commitments and Contingencies" within Notes to Consolidated Financial Statements for information about our lease obligations, which include supply agreements structured as leases; "Note 8: Income Taxes" within Notes to Consolidated Financial Statements for information about our tax obligations, including impacts from Tax Reform enacted in 2017 for the one-time transition tax on previously untaxed foreign earnings; and "Note 13: Borrowings" within Notes to Consolidated Financial Statements for information about our debt obligations. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations. In addition, some of our purchasing requirements are not current obligations and are therefore not included in the amounts above. For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons.

When assessing our current sources of liquidity, we include our total cash and short-term investments as follows:

We suspended the declaration of quarterly dividends starting with Q4 2024. We are prohibited under our commercial CHIPS Act agreement from paying dividends for the next two years and are subject to limitations on the payment of dividends for the three years thereafter. Further, we do not expect to pay dividends until our cash flows improve as we focus on the critical investments needed to execute our business strategy and create long-term value.

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During 2024, we issued a total of $2.6 billion aggregate principal amount of senior notes and remarketed $438 million aggregate principal amount of other bonds for general corporate purposes, including, but not limited to, refinancing of outstanding debt and funding for working capital and capital expenditures. During 2024, 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 to February 2029 and January 2025, respectively. In January 2025, we amended our 364-day $8.0 billion credit facility agreement to $5.0 billion, and the maturity date was extended by one year to January 2026. 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 December 28, 2024, we had no commercial paper obligations outstanding and no outstanding borrowings on the revolving credit facilities. See "Note 13: Borrowings" within Notes to Consolidated Financial Statements for further information.

Our total cash and 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, among other factors, for our strategic business requirements. In 2024, these actions included, among others, negotiating with suppliers to optimize our payment terms and conditions, adjusting the amounts and timing of cash flows associated with customer sales programs and collections, managing inventory levels and purchasing practices, and selling certain of our accounts receivable on a non-recourse basis to third-party financial institutions. While such actions have benefited, and may further benefit, cash flow in the near term, we may experience a corresponding detriment to cash flow in future periods as these actions cease or as the impacts of these actions reverse or normalize.

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 in 2024.

Cash flows from operating, investing, and financing activities were as follows:

Operating Activities

Operating cash flows consist of net income (loss) adjusted for certain non-cash items and changes in certain assets and liabilities.

Cash provided by operations in 2024 was lower compared to 2023 by $3.2 billion as we incurred a net loss in 2024 that was fully offset by a higher amount of favorable operating cash flow adjustments for non-cash items like depreciation, share-based compensation, and restructuring and other expenses, compared to net income in 2023 with lower favorable operating cash flow adjustments.

Investing Activities

Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; proceeds from capital-related government incentives; and proceeds from divestitures and cash used for acquisitions. Our investing capital expenditures were $23.9 billion in 2024 ($25.8 billion in 2023 and $24.8 billion in 2022).

The decrease in cash used for investing activities in 2024 compared to 2023 was primarily due to lower purchases of short-term investments, lower capital expenditures, higher proceeds from capital-related government incentives, and higher sales of equity investments. These 2024 cash favorable activities were partially offset by lower maturities and sales of short-term investments and higher 2024 cash used in other investing activities.

Financing Activities

Financing cash flows consist primarily of proceeds from strategic initiatives, including partner contributions and equity-related issuances, issuance and repayment of short-term and long-term debt, financing for capital expenditures with non-standard payment terms, and payment of dividends to stockholders.

The increase in cash provided by financing activities in 2024 compared to 2023 was primarily due to higher SCIP partner contributions, reduced dividend payments, and other cash favorable financing activities in 2024. These 2024 cash favorable financing activities were partially offset by lower proceeds from debt issuances, net of repayments; the absence of proceeds from sales of subsidiary shares; and higher financing for capital expenditures with non-standard payment terms in 2024.

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Critical Accounting Estimates

The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if: (1) we must make assumptions that are uncertain when the judgment is made, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on our financial position and the results that we report in our Consolidated Financial Statements. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made.

Refer to "Note 2: Accounting Policies" within Notes to Consolidated Financial Statements for further information on our critical accounting estimates, which are as follows, as well as our significant accounting policies:

▪Inventories—the transition of manufacturing costs to inventory, net of factory excess capacity charges. Inventory reflected at the lower of cost or net realizable value considering forecasted future demand and market conditions;

▪Long-lived assets—the valuation methods and assumptions used in assessing the impairment and evaluation of useful lives of property, plant, and equipment; identified intangibles; and impairment of goodwill, including the determination of asset groupings and the identification and allocation of goodwill to reporting units; and

▪Loss contingencies—the estimation of when a loss is probable and reasonably estimable.

Non-GAAP Financial Measures

In addition to disclosing financial results in accordance with US GAAP, this document references adjusted free cash flow, a non-GAAP financial measure. This measure is used by management when assessing our sources of liquidity, capital resources, and quality of earnings and provides an additional means to evaluate the cash flow trends of our business. 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 net partner contributions, (2) payments on finance leases, and (3) proceeds from the McAfee equity sale in 2022.

This non-GAAP financial measure 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.

Following is the reconciliation of our most comparable US GAAP measure to our non-GAAP measure presented:

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Management's Discussion and Analysis

Our Products

We are a global IDM of CPUs and related solutions that we design, develop, manufacture, market, sell, support, and service. Our CPUs and related solutions are incorporated in computing and related end products and services, and utilized globally by consumers, enterprises, governments, and educational organizations. Our customers primarily include OEMs, ODMs, cloud service providers, and other manufacturers and service providers, such as industrial and communication equipment manufacturers and other cloud service providers who buy our products through distributor, reseller, retail, and OEM channels throughout the world. We market and sell these products directly through our global sales and marketing organizations and indirectly through channel partners. We manufacture our products at our fabrication and assembly and test facilities located throughout the world.

Our product offerings provide end-to-end solutions, scaling from data center to network, PCs, edge computing, and the emerging fields of AI and autonomous driving, to serve an increasingly smart and connected world. Products, such as our gaming CPUs, may be sold directly to end consumers, or they may be further integrated by our customers into end products such as notebooks and storage servers. Combining some of these products—for example, integrating FPGAs with Intel Xeon processors in a data center solution—enables incremental synergistic value and performance. In 2023 we launched new products, including the 13th Gen Intel Core mobile processor family, the 4th Gen Intel Xeon Scalable processors with Intel vRAN Boost, and the Intel Core Ultra processors, which feature our first integrated neural processing unit for power-efficient AI acceleration and local inference on the PC.

Our diverse product line includes CPU and chipset, an SoC, or a multichip package based on Intel® architecture that processes data and controls other devices in a system. The primary CPU products in CCG are our Intel Core processors, which include designs specifically for notebook and desktop applications. The primary CPU product in DCAI is our Intel Xeon processor, which includes solutions for data center compute, networking, and the intelligent edge. The primary offerings of NEX include Intel Xeon, Intel Core, and Intel Atom® processor products.

During 2023, we managed our business through the operating segments that are presented below and have included the 2023, 2022 and 2021 financial results for each segment."Note 3: Operating Segments" within the Notes to Consolidated Financial Statements of this Form 10-K reconciles our segment revenues presented below to our total revenues, and our segment operating income (loss) presented below to our total operating income (loss), for each of the periods presented. We have also included a discussion of our 2023, 2022 and 2021 consolidated results of operations and related information subsequent to the operating segment discussion below.

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Market and Business Overview

Market Trends and Strategy

In 2023, the PC market started to stabilize from a soft macroeconomic environment and inflationary pressures, with PC supply and demand levels beginning to normalize. We remain positive on the long-term outlook for PCs, as household density is stable to increasing, educational device penetration rates remain low outside of the US, and PC usage remains elevated compared to pre-pandemic rates1. Commercial growth opportunities also remain as corporations expand the size of their PC fleets, while also replacing older devices. Currently, approximately 200 million commercial devices are more than four years old2.

We see the AI PC as a critical inflection point for the PC market over the coming years, and we believe we are well positioned to capitalize on the emerging growth opportunity of AI. We believe that the PC is as essential as ever, and we expect our leadership in client AI to further support our original forecasted long-term PC TAM of approximately 300 million units3. Together with our industry partners, we are working to increase demand and drive market growth through enhanced PC capabilities, which we expect will lead to greater market penetration and faster PC refresh cycles.

As we continue on our strategy to develop more competitive products and more capabilities for customers, we are designing our product roadmap to drive product leadership grounded in a philosophy of openness and choice. We deliver value to our customers by leveraging our engineering capabilities and working with our partners across an open, innovative ecosystem to deliver technology that drives every major vector of the computing experience, including performance, power efficiency, battery life, connectivity, graphics, and form factors, to create the most advanced PC platforms.

Products and Competition

We released our 14th Gen Intel Core desktop processor family, delivering improved single-threaded and multi-threaded performance when gaming, streaming, and recording. In addition, we released our first Intel Core Ultra family of processors, which utilizes a disaggregated architecture and is the first PC platform built on Intel 4 technology. Our latest processor family is the first client processor to feature a dedicated NPU for AI acceleration and delivers improved power efficiency and graphics performance. Intel Core Ultra represents an inflection point in Intel's client processor roadmap as we usher in the age of the AI PC. With new capabilities in the PC, including significantly improved battery life, AI capabilities with our NPU and GPU products, and up to double the graphics performance with Intel Core Ultra processors, we seek to provide compelling reasons to drive refresh in commercial and consumer markets. We expect to deliver more than 230 Intel Core Ultra designs to market.

There is strong demand for our 13th Gen Intel Core processor family, which features Intel® Thread Director technology and our second-generation performance hybrid architecture. We expect to deliver more than 300 designs from partners across major multi-national corporations and leading manufacturers.

We continue to innovate beyond the CPU to deliver premium PC experiences with Intel Evo Edition laptops and Intel vPro Platforms. We worked with industry partners to co-engineer and deliver new experiences with Intel Evo Edition, which are designed to deliver key experience indicators such as responsiveness, battery life, intelligence collaboration, and Intel Unison Multi-Device Experience. Intel vPro is designed for enterprise needs and delivers increased productivity, connectivity, security features, and remote manageability.

We operate in a particularly competitive market. In processors, we compete with Advanced Micro Devices, Inc. (AMD) and vendors who design applications processors based on ARM architecture*, such as Qualcomm Inc. (Qualcomm), and Apple Inc. (Apple), with its M1 and M2 products. We expect this competitive environment to continue to intensify in 2024.

We remain committed to creating an open ecosystem to foster growth and technology innovations. We embrace and collaborate with a global ecosystem of industry partners to deliver leadership technologies together. We launched the industry's first AI PC Acceleration Program, designed to provide the software ecosystem with engineering tools and resources to enable AI on more than 100 million PCs through 2025. We also announced a collaboration with Microsoft to drive the development of AI on personal computing, with Intel Core Ultra processors and Windows 11 expected to scale across the ecosystem of Intel and Microsoft OEM and ISV partners.

During 2023, we continued to diversify our product strategy across nodes, advance our packaging capabilities with disaggregated silicon, and balance internal and external manufacturing. We increased our levels of operating inventory and worked with our customers to develop strategically located supply hubs that forward position inventory. In addition, we continue to invest in a globally diverse supply chain that enables us the flexibility and proximity to support customers. These have further enhanced the service and responsiveness we are able to provide our customers.

1Source Intel calculated PC density from industry analyst reports.

2Source: Intel calculated volume of devices over four years old from industry analyst reports and internal data.

3Source: Intel calculated multi-year TAM forecast derived from industry analyst reports.

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Financial Performance

Revenue Summary

2023 vs. 2022

▪Notebook revenue was $17.0 billion, down $1.8 billion from 2022. Notebook volume decreased 5% from 2022, driven by lower demand across market segments, partially offset by increased volume in the second half of the year as customer inventory levels normalized compared to higher levels in the first half. Notebook ASPs decreased 5% from 2022 due to relative strength in the education market segment resulting in a higher mix of small core products combined with a higher mix of older generation products.

▪Desktop revenue was $10.2 billion, down $495 million from 2022. Desktop volume decreased 9% from 2022, driven by lower demand across market segments, partially offset by increased volume in the second half of the year as customer inventory levels normalized compared to higher levels in the first half. Desktop ASPs increased 5% from 2022, due to an increased mix of product sales to the commercial and gaming market segments.

▪Other revenue was $2.1 billion, down $229 million from 2022, primarily driven by the continued ramp down of our legacy smartphone modem business and lower demand for our wireless and connectivity products as a result of lower notebook volumes.

2022 vs. 2021

▪Notebook revenue was $18.8 billion, down $6.7 billion from 2021. Notebook volume decreased 36% from 2021, driven by lower demand in the consumer and education market segments, and notebook ASPs increased 15% from 2021 due to an increased mix of commercial and consumer products and a lower mix of education products.

▪Desktop revenue was $10.7 billion, down $1.8 billion from 2021. Desktop volume decreased 19% from 2021, driven by lower demand in the consumer and education market segments, and desktop ASPs increased 5% from 2021, primarily from an increased mix of commercial products.

▪Other revenue was $2.3 billion, down $870 million from 2021, primarily driven by the continued ramp down of our legacy smartphone modem business and lower demand for our wireless and connectivity products.

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Operating Income Summary

Operating income increased 17% year over year, and operating margin was 22% in 2023 and 18% in 2022.

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Market and Business Overview

Market Trends and Strategy

Data is a significant force in society and is generated daily at an unprecedented pace. The desire to harness insights from data to drive better outcomes for businesses and society is ever expanding. AI is becoming pervasive in nearly all applications, creating the potential for intelligence everywhere, and enabling powerful new uses of compute resources across all market segments. The installed base of Intel Xeon processors, combined with our portfolio of heterogeneous compute solutions (FPGAs, GPUs, IPUs, and AI accelerators), we believe positions us to lead in this high-growth area. DCAI is integral to our growth in AI through deep investments in the AI ecosystem, developer tools, frameworks, networking and memory, technologies, and open standards to drive a scalable path forward.

We take a system-level approach that supplies the necessary hardware and software optimized for power and performance. Our technology is differentiated at the system level and in high-growth workloads based on our integrated hardware acceleration engines and software. For example, architected into our Intel Xeon processors are Intel® Advanced Matrix Extensions (Intel® AMX) for AI acceleration; Intel® Software Guard Extensions (Intel® SGX), providing enclaves of protected memory designed to deliver enhanced security for sensitive data; and Intel® Crypto Acceleration, which is designed to deliver breakthrough performance across cryptographic algorithms. We believe this acceleration and performance will continue to drive our differentiated value and growth across our customer base.

Products and Competition

Our products and services include:

We provide our customers with an extensive portfolio of silicon and software products, engineered to deliver workload-optimized performance. Our hardware portfolio comprises CPUs, GPUs, domain-specific accelerators, and FPGAs, designed to support the performance, agility, and security that our customers demand. Deployment of our silicon platforms is accelerated by a software development environment that enables workload mobility across our heterogeneous architectures and enables developers to execute their workloads on the hardware that best meets application requirements.

Our competitors include AMD, providers of GPU products such as NVIDIA, companies developing their own custom silicon, and new entrants and incumbents developing ARM- and RISC-V-based products customized for specific data center workloads. We expect this competitive landscape to continue.

The Intel Xeon Scalable processor family delivers advanced CPUs for the data center, the network, and the edge, driving industry-leading performance, manageability, and security with differentiated features and capabilities. In 2023, we launched the 5th Gen Intel Xeon Scalable processors, which utilize modular SoCs for increased scalability and flexibility to deliver a range of products that meet the growing scale, processing, and power efficiency needs for AI, cloud, and enterprise installations.

Our Intel Gaudi 2 AI deep learning processor is engineered to allow customers to benefit from the most cost-effective, high-performance training and inference alternative to comparable GPUs.

Our FPGA and structured ASIC portfolio enhances Intel's ability to meet the needs of customers in the data center, across the network, and at the edge. In 2023, we released 21 new products within our FPGA business. These include the Intel Agilex 9 and Intel Agilex 7 product families, which are intended to handle the increased demand for customized workloads, including enhanced AI capabilities, and to provide lower total cost of ownership.

Our Intel Xeon CPU Max Series, introduced in 2022, was the first and only x86-based processor with high bandwidth memory for HPC and AI workloads. The Intel Data Center GPU Max Series 1550 and 1100 are now broadly available through OEM systems. Our Intel CPU Max Series includes 64GB of on-package high bandwidth memory, which benefits data-intensive HPC workloads. Our Intel Data Center GPU Flex Series offers customers a flexible, general-purpose GPU for the data center and the intelligent visual cloud. We delivered and installed, in collaboration with Argonne National Laboratory (ANL) and Hewlett Packard Enterprise (HPE), the largest cluster of Max GPUs to the Aurora Supercomputer at ANL.

The ubiquity of Intel Xeon in the installed base, along with our heterogeneous compute solutions combined with software that unlocks the value of our hardware, enable our customers to develop highly differentiated solutions. Our integrated approach has created significant value for Intel, our customers, and our partners by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities to apply our technology to address our customers' and society's most complex issues.

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Financial Performance

Revenue Summary

2023 vs. 2022

Revenue was $15.5 billion, down $3.9 billion from 2022, driven by a decrease in server revenue. Server volume decreased 37% from 2022, due to lower demand in a softening CPU data center market. Server ASPs increased 20% from 2022, primarily due to a lower mix of hyperscale customer-related revenue and a higher mix of high core count products.

2022 vs. 2021

Revenue was $19.4 billion, down $3.3 billion from 2021, due to a decrease in server revenue, partially offset by higher other DCAI revenue. Server volume decreased 16% from 2021, led by enterprise customers in a competitive environment, and due to customers tempering purchases to reduce existing inventories in a softening data center market. Server ASPs decreased 5% from 2021, driven by a higher mix of revenue from hyperscale customers. Other DCAI revenue increased 18% from 2021 primarily driven by growth in our FPGA business.

Operating Income (Loss) Summary

We had an operating loss of $530 million in 2023, compared to operating income of $1.3 billion in 2022.

Market and Business Overview

Market Trends and Strategy

The Internet is undergoing a shift toward a cloud-to-edge infrastructure, combining unrivaled scale and capacity in the cloud with faster response times at nearby edges. As AI is transforming and automating every industry—from factories to smart cities to hospitals—the demand for high-performance computing at the edge has expanded exponentially. Networks are moving toward software, becoming more programmable and flexible.

Our network and edge solutions aim to unleash the power of intelligent edge solutions for our customers and move the world's networks to a software infrastructure that runs on Intel technologies by (1) providing edge-optimized, AI-enabled compute and connectivity solutions to run every workload at the edge, between the cloud and the end user, and (2) deploying software platforms that enable developers to build, deploy, run, manage, connect, and secure distributed edge infrastructure, applications, and edge AI across several verticals, such as industrials, federal, aerospace, retail, healthcare, education, and smart cities.

Products and Competition

With a greater emphasis on systems and solutions designed to harness the growth of data processed at the edge to yield insights, our competitive landscape has shifted beyond application-specific standard product vendors to include cloud, network, and AI computing platform providers.

Today, we speed the deployment of network and edge computing solutions based on our open software frameworks, AI-enabled platform solutions, and edge and network-optimized broad silicon portfolio to address a wide range of applications across several markets.

On-Premises Edge: More than just providing silicon, we partner with companies to design and deliver solutions to help a wide range of customers transform their businesses and take advantage of the rapidly increasing number of connected and intelligent devices. We develop high-performance, AI-enabled compute platforms that solve for technology and business use cases that scale across several industries, such as retail, education, manufacturing, energy, healthcare, and medical.

We deliver edge-optimized AI-enabled platforms for edge applications based on our Intel Xeon, Intel Core, and Intel Atom processor portfolio, which reduces operational complexity for our customers and helps our customers create, store, and process data at the edge so they can analyze it faster and act on it sooner. We also build differentiated networking offerings that keep pace with industry speeds and deliver unique features needed for the intelligent edge, such as networking offloads, time-sensitive networking, and scalable reliable transport.

Enterprise Networking: Enterprises are evolving their networks to connect new and varying environments, host services from anywhere between cloud and edge, deliver heightened service levels, and handle growing volumes of devices and data. We are leading the world's shift to run networking workloads in software and create network function virtualization to provide our customers with more efficient, cost-effective, and programmable platforms that enable secure, agile, and reliable networking solutions from edge to cloud. We work with our ecosystem partners of over 500 network builders to help enterprises optimize their networks with right-sized compute and connectivity requirements for current and future needs.

Telecommunication Networks: We lead 5G core network deployments, demonstrating that 5G base stations can be almost entirely built from software running on Intel Xeon processors with Intel vRAN Boost. We continue to drive the transformation from fixed-function networks onto Intel Xeon Scalable processors and Intel Xeon D processors coupled with our FlexCore and FlexRAN™ software. Our customers are tier-one global communication service providers and their equipment suppliers. Our software-based cloud RAN platform is designed to allow operators to deploy the fastest cloud-native 5G infrastructure quickly and efficiently at scale to meet the needs of their end customers.

Cloud Networking: Our cloud customers require uncompromised data center network performance and reliability driven by increased networking investments to support AI cluster deployments. We address these requirements by providing our open-standards-based NICs and IPUs. The IPU, a new class of product, is an open and programmable compute platform that frees up more compute cycles for customers by running infrastructure workloads in a separate, secure, and isolated set of CPU cores.

Software and Platforms: Our customers' need for flexibility, programmability, and versatility drives workloads toward software and away from fixed-function hardware. As networking in the cloud, core network, 5G, and private networks move to software, and as our edge customers increasingly deploy AI applications, we aim to simplify innovation on Intel hardware. We support our customers' software strategy at the edge with an edge-native software platform with modular building blocks, premium service, and support offerings. The platform enables developers to build, deploy, run, manage, connect, and secure distributed edge infrastructure, applications, and edge AI. The platform is a horizontal approach to scaling the needed infrastructure for the intelligent edge and hybrid AI, as well as bringing together an ecosystem of Intel and third-party vertical applications. Offering unique optimizations for network, the Internet of Things, hybrid AI, and edge workloads on Intel architecture, the platform also broadly supports diverse architectures and can be consumed on a modular basis—avoiding vendor lock-in. The platform delivers a seamless cloud-like experience, combining truly edge-native capabilities for security and zero-touch management with our deep industry experience and unrivaled ecosystem.

Financial Performance

Revenue Summary

2023 vs. 2022

Revenue was $5.8 billion, down $2.6 billion from 2022, as customers tempered purchases to reduce inventories and adjust to a lower demand environment across product lines.

2022 vs. 2021

Revenue was $8.4 billion, up $744 million from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Ethernet demand declined in Q4 2022 due to lower server demand, and edge demand declined in Q4 2022 due to macroeconomic factors.

Operating Income (Loss) Summary

We had an operating loss of $482 million in 2023, compared to operating income of $1.0 billion in 2022.

Market and Business Overview

Market Trends and Strategy

In 2023, the automotive industry grew with an approximately 9% increase in global vehicle production year over year. We expect industry ADAS volumes to grow faster than overall global vehicle production in the coming years and anticipate long-term ADAS growth from increases in the percentage of vehicles that are equipped with basic ADAS features from the factory. Despite our expectation for a decline in Mobileye ADAS volumes in 2024 due to a correction of inventory with our customers, we continue to believe we will benefit from positive industry ADAS growth over the medium-term. In addition to potential volume growth, our portfolio of advanced solutions has the potential to drive higher average system price over time.

Beyond ADAS solutions, we believe that the availability of AVs will cause a significant transformation in mobility, including vehicle ownership and utilization. We expect that AV technology will eventually be accessed by consumers through shared-vehicle MaaS networks, as well as in consumer-owned and operated AVs. We are pursuing this market trend by using our eyes-on/hands-off Mobileye SuperVision solution as a baseline to scale to our eyes-off/hands-off Mobileye Chauffeur consumer AV product in a variety of operational design domains. As it relates to AMaaS, we intend to primarily go to market by supplying Mobileye Drive™ self-driving system to transportation network companies, public transit operators, and suppliers of AV-ready vehicle platforms. In some cases, we expect to bundle our Mobileye Drive self-driving system with Moovit’s urban mobility and transit intelligence application and its global user base.

Products and Competition

We currently ship a variety of ADAS solutions to a large number of global automakers. We are recognized for our top-rated safety solutions globally, and since 2007, we have introduced numerous industry-first ADAS products.

We are building a robust portfolio of end-to-end ADAS and autonomous driving solutions to provide the capabilities needed for the future of autonomous driving, leveraging a comprehensive suite of purpose-built software and hardware technologies. We pioneered “base” ADAS features to enhance vehicle safety and to meet global regulatory requirements and safety ratings with our driver assist solution and we have since created a new category of ADAS with our Cloud-Enhanced Driver-Assist™ and premium driver assist offerings, such as Mobileye SuperVision. By leveraging Mobileye SuperVision’s full-surround computer vision and True Redundancy™, we are developing Mobileye Chauffeur, our consumer AV solution and Mobileye Drive, our eyes-off/hands-off autonomous driving solution designed for fleet deployment. Our current offerings to Tier 1 and OEM customers do not include cameras, radars, lidar systems, or other sensors (except in particular cases). We intend in the future to offer radar and lidar products that are currently in development stages.

The ADAS and autonomous driving industries are highly competitive. In the ADAS and consumer AV market, we face competition primarily from other external providers, including Tier 1 automotive suppliers and silicon providers, as well as in-house solutions developed by OEMs to a certain extent. Our Tier 1 customers may be developing or may in the future develop competing solutions. In the autonomous driving market, including AMaaS and consumer AV, we face competition from technology companies; internal development teams from the automakers themselves, sometimes in combination with investments in early-stage autonomous vehicle technology companies, Tier 1 automotive companies, as well as robotaxi providers.

1Source: S&P Global Production Forecast

Financial Performance

Revenue and Operating Income Summary

2023 vs. 2022

Revenue was $2.1 billion, up $210 million from 2022, primarily driven by higher demand for EyeQ products. Operating income was $664 million, down $26 million from 2022.

2022 vs. 2021

Revenue was $1.9 billion, up $483 million from 2021, primarily driven by higher demand for EyeQ products and Mobileye SuperVision systems. Operating income was $690 million, up $136 million from 2021, primarily due to higher revenue, partially offset by increased investments in leadership products.

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Market and Business Overview

Market Trends and Strategy

The chip industry is undergoing a structural transformation driven by:

▪Five superpowers: ubiquitous compute, pervasive connectivity, cloud-to-edge infrastructure, AI, and sensing;

▪A generational shift in computer architectures: the move from system on chip to system of chips (chiplets), increased tailoring of chips to workloads, especially AI, and the vertical integration into chipmaking by OEMs and CSPs;

▪Increasing costs of R&D and capacity for advanced node technologies; and

▪Supply chain risk highlighted by geo-political issues and the growing need for a resilient, secure, and sustainable global supply chain.

These transformational trends are driving significant semiconductor market growth in leading-edge silicon and packaging technologies, especially in systems of chips for AI applications. Customers have to make complex design choices at every level of the system, from packaging technologies, process nodes, interconnects, physical IP, and compute elements to software. The abundance of technology choices and optimizations is adding complexity in design, technology, integration, and manufacturing.

Our IDM 2.0 strategy includes our pursuit of these complex manufacturing and market growth opportunities by making significant capital investments in leading-edge semiconductor technologies in order to create foundry capacity and establish IFS as a major provider of foundry services that provides semiconductor manufacturing solutions for others and for ourselves. We have made and expect to continue to make significant capital investments in furtherance of this strategy.

Products and Competition

We seek to address this tectonic shift in the chip industry by enabling our customers to create optimized systems of chips by combining the best technologies from Intel and the ecosystem. We believe Open System Foundry is a world-class foundry offering, delivered from a resilient, secure, and sustainable source of supply and complemented by access to the systems of chips capabilities from Intel. The basic foundry offering is advanced process technologies backed by an ecosystem of IP, EDA, and design services, which enable customers to design as they would with other foundries. The systems of chips capabilities include advanced packaging technologies, software to accelerate bring-up and integration of complex chips, and driving standards that will improve system performance.

With our IFS accelerator program members and the Arm and Synopsys agreements, we believe we are well on the way to building out a world-class foundry offering. With the rise of AI, our advanced packaging business is expected to be another unique advantage for Intel. Chips created with us or other foundries can be packaged using Intel's advanced packaging technologies, including 2D and 2.5D/3D solutions designed to enable large, highly scalable packages at competitive costs. We continue to drive technologies, capabilities, and standards needed to optimize systems of chips, including the Universal Chiplet Interconnect Express* standard for communication between chips in a system, which was demonstrated in silicon in 2023. We accelerate our customers' designs by providing services and software that leverage Intel's vast experience as a systems company.

Our competitors are mostly pure-play foundries that focus on delivering a pure-play foundry offering from fabrication plants based primarily in Asia. Of the five major semiconductor foundries, TSMC, Samsung, Global Foundries (GF), United Microelectronics Corporation (UMC), and Semiconductor Manufacturing International Corporation (SMIC), only Samsung is an IDM and foundry, and only GF is headquartered in the US. TSMC leads the market with 59% market share, followed by Samsung at 16% in 20221. Neither Samsung nor TSMC currently offers its most advanced nodes outside of Asia and both have limited advanced node capacity in the US.

We believe the Open System Foundry model delivers differentiated capabilities to help our customers lead in their industries while bringing stability to the global semiconductor supply chain. The momentum and customer commitments we are seeing demonstrate that our strategy and offerings are resonating, and we look to build on this success in 2024 and in future periods.

1Source: TrendForce

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Financial Performance

Revenue and Operating Income (Loss) Summary

2023 vs. 2022

Revenue was $952 million, up $483 million from 2022, driven by higher packaging revenue. We had an operating loss of $482 million, compared to an operating loss of $281 million from 2022, primarily due to increased spending to drive strategic growth.

2022 vs. 2021

Revenue was $469 million, up $122 million from 2021, primarily driven by higher sales of multi-beam mask writer tools. We had an operating loss of $281 million, compared to operating income of $76 million in 2021, primarily due to increased spending to drive strategic growth.

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Consolidated Results of Operations

For additional key highlights of our results of operations, see "A Year in Review."

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Revenue

Segment Revenue Walk $B

2023 vs. 2022

2023 revenue was $54.2 billion, down $8.8 billion, or 14%, from 2022. CCG revenue decreased 8% from 2022 primarily due to lower notebook and desktop volume driven by lower demand across market segments, partially offset by increased volume in the second half of the year as customer inventory levels normalized compared to higher levels in the first half. Notebook ASPs decreased due to the relative strength in the education market segment resulting in a higher mix of small core products combined with a higher mix of older generation products, and were partially offset by higher desktop ASPs due to an increased mix of product sales to the commercial and gaming market segments. DCAI revenue decreased 20% from 2022 due to lower server volume resulting from a softening CPU data center market, which was partially offset by higher server ASPs from a lower mix of hyperscale customer-related revenue and a higher mix of high core count products. NEX revenue decreased 31% from 2022 as customers tempered purchases to reduce existing inventories and adjust to a lower demand environment across product lines.

Incentives offered to certain customers to accelerate purchases and to strategically position our products with customers for market segment share purposes, contributed approximately $700 million to our revenue during Q4 2023, the impacts of which were contemplated in our financial guidance for Q1 2024, as included in our Form 8-K dated January 25, 2024.

2022 vs. 2021

2022 revenue was $63.1 billion, down $16.0 billion, or 20%, from 2021. CCG revenue was down 23% from 2021 due to lower notebook and desktop volume in the consumer and education market segments, and lower revenue due to the continued ramp down from the exit of our 5G smartphone modem business and lower demand for our wireless and connectivity products. Notebook volume decreased, driven by lower demand in the consumer and education market segments, while ASPs increased due to the resulting product mix. Desktop volume decreased, driven by lower demand in the consumer and education market segments while ASPs increased due to an increased mix of commercial products. DCAI revenue decreased 15% from 2021 due to lower server demand from enterprise customers, and due to customers tempering purchases to reduce existing inventories in a softening data center market. The decrease was partially offset by higher revenue from our FPGA business. Server ASPs decreased due to customer and product mix. NEX revenue increased 10% from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Mobileye revenue increased 35% from 2021, primarily driven by higher demand for EyeQ products and Mobileye Supervision systems. The decrease in our "all other" revenue was due to revenue from the divested NAND memory business of $4.3 billion recognized in 2021, for which historical results are recorded in “all other,” and $584 million of revenue recognized in 2021 from a prepaid customer supply agreement.

Incentives offered to certain customers to accelerate purchases and to strategically position our products with customers for market segment share purposes, particularly in CCG, contributed approximately $1.7 billion to our revenue during Q4 2022.

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Gross Margin

We derived most of our overall gross margin in 2023 from the sale of products in the CCG and DCAI operating segments. Our overall gross margin dollars in 2023 decreased by $5.2 billion, or 19%, compared to 2022, and in 2022 decreased by $16.9 billion, or 39%, compared to 2021.

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We are making capital investments in furtherance of our IDM 2.0 strategy. As of December 30, 2023, our capital investments classified as construction in progress totaled $43.4 billion ($36.7 billion as of December 31, 2022). These assets have not yet been placed into service and have not yet begun depreciating. As these construction-in-progress assets are placed into service, we expect to incur depreciation expense that impacts future production costs and, ultimately, cost of sales. To the extent we are unable to grow our revenues to offset these production costs, our gross margin and operating income will be unfavorably affected. Additionally, we could incur asset impairments on property, plant, and equipment assets if our IDM 2.0 strategy is not successful.

Effective January 2023, we increased the estimated useful life of certain production machinery and equipment from 5 to 8 years. When compared to the estimated useful life in place as of the end of 2022, we estimate total depreciation expense in 2023 was reduced by $4.2 billion. We estimate this change resulted in an approximately $2.5 billion increase to gross margin, $400 million decrease in R&D expenses, and $1.3 billion decrease in ending inventory values. These estimates are based on the assets in use and under construction as of the beginning of 2023 and are calculated at that point in time. Most of the depreciation expense associated with this useful life change is included in overhead cost pools and is combined with other costs and other depreciation expense from assets placed into service after this calculation was performed, for which such costs are subsequently absorbed into inventory as each product passes through our manufacturing process. As a result, the actual amount of impact from the useful life change that is included in our 2023 operating results and financial position is impractical to individually and specifically quantify on a year-over-year basis.

Operating Expenses

Total R&D and MG&A expenses for 2023 were $21.7 billion, down 12% compared to 2022. These expenses represent 40.0% of revenue for 2023 and 38.9% of revenue for 2022. In support of our strategy, we continue to make significant investments to accelerate our process technology roadmap. This requires increased investments in R&D and focused efforts to attract and retain talent. We have implemented certain cost-cutting measures while we continue to improve our product execution.

Research and Development

Marketing, General, and Administrative

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Restructuring and Other Charges

The 2022 Restructuring Program was approved to rebalance our workforce and operations and to create efficiencies and improve our product execution in alignment with our strategy. In 2023, activity related to the 2022 Restructuring Program consisted of cash settlements of previously accrued employee severance and benefit arrangements, as well as incremental accruals throughout the year and was substantially complete as of December 30, 2023. The 2022 Restructuring Plan, in conjunction with other initiatives, reduced our cost structure and allowed us to reinvest certain of these cost savings in resources and capacity to develop, manufacture, market, sell, and deliver our products in furtherance of our strategy. The cumulative cost of the 2022 Restructuring Program as of December 30, 2023 was $1.3 billion.

Litigation charges and other includes a $1.2 billion benefit in 2023 due to a reduction in the previously accrued $2.2 billion charge as a result of developments in the VLSI litigation in Q4 2023. 2023 charges also include a $401 million charge for an EC-imposed fine. In 2009, we recorded and paid an EC-imposed fine that was subsequently annulled, resulting in a benefit of $1.2 billion in 2022. Also in 2023, we mutually agreed with Tower to terminate the acquisition agreement that was entered into during 2022 and, as a result, we paid a $353 million termination fee to Tower in accordance with the terms of the agreement.

Gains (Losses) on Equity Investments and Interest and Other, Net

Gains (Losses) on Equity Investments, Net

Ongoing mark-to-market adjustments recognized in 2023, 2022, and 2021 were primarily driven by our investment in Montage Technology, Co. Ltd. (Montage).

In 2023, we recognized $243 million of initial fair value adjustments in sale of equity investments and other related to the public market offerings of four of our portfolio companies; in 2022, we recognized $278 million of initial fair value adjustments related to the public market offerings of five of our portfolio companies; and in 2021, we recognized $447 million related to the public market offerings of four of our portfolio companies.

In 2022, the sale of McAfee Corp. (McAfee) consumer business was completed, and we received $4.6 billion in cash for the sale of our remaining share of McAfee, recognizing a $4.6 billion gain in sale of equity investments and other. In 2021, we recognized McAfee dividends of $1.3 billion, which included a special dividend of $1.1 billion paid in connection with the sale of McAfee's enterprise business, and recognized $228 million related to the partial sale of our investment in McAfee.

In 2021, we recognized $471 million in observable price adjustments related to our investment in Beijing Unisoc Technology Ltd.

Interest and Other, Net

In 2022, we recognized a gain of $1.0 billion from the first closing of the divestiture of our NAND memory business.

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Provision for (Benefit from) Taxes

Our effective tax rate decreased in 2023 compared to 2022, primarily driven by our R&D tax credits, which provide a tax benefit based on our eligible R&D spending and are not dependent on lower income before taxes, and a higher proportion of our income being taxed in non-US jurisdictions. Our benefit from income taxes increased in 2023 compared to 2022 primarily due to a higher proportion of our income being taxed in non-US jurisdictions. The 2023 shift in income was attributable to the 2022 tax costs associated with the gains recognized from the equity sale of McAfee and the divestiture of our NAND memory business.

Our effective tax rate decreased in 2022 compared to 2021, primarily driven by a higher proportion of our income being taxed in non-US jurisdictions and a change in tax law from 2017 Tax Reform related to the capitalization of R&D expenses that went into effect in January 2022. In 2022 we recognized a benefit from taxes as compared to a provision for taxes in 2021 as the higher proportion of our income being taxed in non-US jurisdictions and the change in tax law from 2017 Tax Reform were only partially offset by the tax costs associated with the gains recognized from the equity sale of McAfee and the divestiture of our NAND memory business.

In 2021 the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

Liquidity and Capital Resources

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, supplemented by our total cash and investments1, is our primary source 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 and pending 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. These plans include expanding existing operations in Arizona, Ireland, Israel, New Mexico, and Oregon, and investing in new leading-edge manufacturing facilities in Germany and Ohio. We also 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 investments. Conversely, incentives below our expectations would increase our anticipated cash requirements. We expect our planned capital investments to continue to put pressure on our adjusted free cash flow in the short term.

As we invest in multiple expansions, we expect our capital expenditures to continue to be higher than historical levels for the next several years. We expect to adjust the cadence of our investments based on the execution of our roadmap and changing business conditions. As of December 30, 2023, we had commitments for capital expenditures of $20.4 billion for 2024 and had $7.1 billion in capital expenditures committed in the long term. As of December 30, 2023, other purchase obligations and commitments in 2024 under our binding commitments for purchases of goods and services were $2.7 billion, with an additional $5.6 billion committed in the long term.

We have additional obligations as part of our ordinary course of business, beyond those committed for capital expenditures and other purchase obligations and commitments for purchases of goods and services. For example, see "Note 19: Commitments and Contingencies" within the Notes to Consolidated Financial Statements for information about our lease obligations, which include supply agreements structured as leases; "Note 8: Income Taxes" within the Notes to Consolidated Financial Statements for information about our tax obligations, including impacts from Tax Reform enacted in 2017 for the one-time transition tax on previously untaxed foreign earnings; and "Note 13: Borrowings" within the Notes to Consolidated Financial Statements for information about our debt obligations. The expected timing of payments of our obligations is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the timing of receipt of goods or services, or changes to agreed-upon amounts for some obligations. In addition, some of our purchasing requirements are not current obligations and are therefore not included in the amounts above. For example, some of these requirements are not handled through binding contracts or are fulfilled by vendors on a purchase order basis within short time horizons.

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When assessing our current sources of liquidity, we include our total cash and investments1 as follows:

1 See "Non-GAAP Financial Measures" within MD&A.

We maintain a diverse investment portfolio that we continually analyze based on issuer, industry, and country. Substantially all of our investments in debt instruments are in investment-grade securities.

Our sources of liquidity in 2023 included $1.5 billion from partner contributions, net proceeds of $1.6 billion from a secondary offering of Mobileye Class A common stock, $1.4 billion of cash proceeds from the sale of minority stakes in our IMS business to both Bain Capital and TSMC, and government incentives of $1.0 billion. Other potential sources of liquidity include 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, other securities, and non-recourse factoring arrangements with third-party financial institutions. Under our commercial paper program, we have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion and, as of December 30, 2023, we had no commercial paper obligations outstanding. During 2023, we issued a total of $11.0 billion aggregate principal amount of senior notes for general corporate purposes, including, but not limited to, refinancing our outstanding debt and funding for working capital and capital expenditures. We also amended both our five-year $5.0 billion variable-rate revolving credit facility agreement, extending that maturity date by one year to March 2028, and our 364-day $5.0 billion credit facility agreement, extending the maturity date to March 2024. As of December 30, 2023, we had no borrowings outstanding on the revolving credit facilities.

In Q1 2023, we declared a reduced quarterly dividend on our common stock. This dividend reduction reflects our deliberate approach to capital allocation, is expected to support the critical investments needed to execute our business strategy, and is designed to position us to create long-term value. In January 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 March 1, 2024 to stockholders of record as of February 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.

Our cash and 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, among other factors, for our strategic business requirements. In 2023 these actions included, among others, negotiating with suppliers to optimize our payment terms and conditions, adjusting the amounts and timing of cash flows associated with customer sales programs and collections, managing inventory levels and purchasing practices, and selling certain of our accounts receivable on a non-recourse basis to third-party financial institutions. While such actions have benefited, and may further benefit, cash flow in the near term, we may experience a corresponding detriment to cash flow in future periods as these actions cease or as the impacts of these actions reverse or normalize.

Our cash flows for each period were as follows:

Operating Activities

Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities.

For 2023 compared to 2022, the $4.0 billion decrease in cash provided by operating activities was primarily driven by lower 2023 net income after adjusting for non-cash items, partially offset by 2023 cash-favorable working capital changes compared to 2022.

For 2022 compared to 2021, the $14.0 billion decrease in cash provided by operating activities was primarily driven by lower 2022 net income after adjusting for non-cash items, including the gain on the sale of McAfee and the pre-tax gain from the divestiture of our NAND business, partially offset by 2022 cash-favorable working capital changes compared to 2021.

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Investing Activities

Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; proceeds from capital-related government incentives; and proceeds from divestitures. Our capital expenditures were $25.8 billion in 2023 ($24.8 billion in 2022 and $18.7 billion in 2021).

The increase in cash used for investing activities in 2023 compared to 2022 was primarily due to a lack of proceeds from the divestiture of our NAND business and from the sale of our remaining McAfee share that occurred in 2022, lower maturities and sales of short-term investments, and increased capital expenditures. These unfavorable cash flow impacts during 2023 were partially offset by higher 2023 proceeds from capital-related government incentives and by other cash favorable investment activities, including lower acquisitions during 2023.

The decrease in cash used for investing activities in 2022 compared to 2021 was primarily due to increased maturities and sales of short-term investments, proceeds from the divestiture of our NAND business, and proceeds from the sale of our remaining share of McAfee, partially offset by an increase in capital expenditures.

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.

The increase in cash provided by financing activities in 2023 compared to 2022 was primarily due to higher debt issuances along with lower repayment of long-term debt, decreased dividend payments to stockholders, and increased proceeds from sales of subsidiary shares, partially offset by commercial paper issuances in 2022 that were subsequently repaid in 2023. Our total dividend payments were $3.1 billion in 2023, compared to $6.0 billion in 2022. We have paid a cash dividend in each of the past 125 quarters.

Cash provided by financing activities in 2022 compared to cash used for financing activities in 2021 was primarily due to higher commercial paper and debt issuances, our 2022 curtailment of common stock repurchases, proceeds from the Mobileye IPO, and partner contributions for joint investments, partially offset by higher 2022 debt repayments.

Critical Accounting Estimates

The methods, assumptions, and estimates that we use in applying our accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if: (1) we must make assumptions that are uncertain when the judgment is made, and (2) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on our financial position and the results that we report in our Consolidated Financial Statements. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made.

Refer to "Note 2: Accounting Policies" within the Notes to Consolidated Financial Statements for further information on our critical accounting estimates, which are as follows, as well as our significant accounting policies:

▪Inventories—the transition of manufacturing costs to inventory, net of factory excess capacity costs. Inventory reflected at the lower of cost or net realizable value considering forecasted future demand and market conditions;

▪Long-lived assets—the valuation methods and assumptions used in assessing the impairment and evaluation of useful lives of property, plant, and equipment; identified intangibles; and impairment of goodwill, including the determination of asset groupings and the identification and allocation of goodwill to reporting units; and

▪Loss contingencies—the estimation of when a loss is probable and reasonably estimable.

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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. Beginning in 2023, 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. Prior-period non-GAAP financial measures have been retroactively adjusted to reflect this updated approach.

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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Following are the reconciliations of our most comparable US GAAP measures to our non-GAAP measures presented:

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Management's Discussion and Analysis

Our Products

We are a global IDM of CPUs and related solutions that we design, develop, manufacture, market, sell, support and service. Our CPUs and related solutions are incorporated in computing and related end products and services, and utilized globally by consumers, enterprises, governments, and educational organizations. Our customers primarily include OEMs, ODMs, cloud service providers, and other equipment manufacturers that we market and sell to directly through our global sales and marketing organizations and indirectly through channel partners. We manufacture our products at our fabrication and assembly and test facilities located throughout the world.

Our CPU and related product offerings provide end-to-end solutions, scaling from edge computing to 5G networks, the cloud, and the emerging fields of AI and autonomous driving. Products, such as our gaming CPUs, may be sold directly to end consumers, or they may be further integrated by our customers into end products such as notebooks and storage servers. Combining some of these products—for example, integrating FPGAs with Intel Xeon processors in a data center solution—enables incremental synergistic value and performance. We launched new products in 2022, such as the 12th Gen Intel Core HX processors, the final products in our Alder Lake family; Raptor Lake, our 13th Gen Intel 7 client product; and Sapphire Rapids, the first of our 4th Gen Intel Xeon Scalable processors. We also added to our graphics offerings with the introduction of Ponte Vecchio and Alchemist.

Our diverse product line includes CPU and chipset, an SoC, or a multichip package based on Intel® architecture that processes data and controls other devices in a system. The primary CPU products in CCG are our Intel Core processors, which include designs specifically for notebook and desktop applications. The primary CPU product in DCAI is our Intel Xeon processor, which includes solutions for data center compute, networking, and the intelligent edge. The primary offerings of NEX include Intel Xeon, Intel Core, and Intel Atom® processor products.

During 2022, we managed our business through the operating segments that are presented below and have included the 2022, 2021 and 2020 financial results for each segment. "Note 3: Operating Segments” within the Notes to Consolidated Financial Statements of this Form 10-K reconciles our segment revenues presented below to our total revenues, and our segment operating margin (loss) presented below to our total operating margin (loss), for each of the periods presented. We have also included a discussion of our 2022, 2021 and 2020 consolidated results of operations and related information subsequent to the operating segment discussion below.

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Market and Business Overview

Market Trends and Strategy

In 2022, the PC business experienced one of the most challenging years in recent history, resulting from a softening macroeconomic environment and inflationary pressures. Despite these headwinds in 2022—which resulted in a double-digit TAM decline1—PC usage remains strong, demonstrating the increased utility and value of the PC and we believe ultimately supporting a TAM well above pre-pandemic levels, once this period of adjustment subsides. The significant behavior changes that took shape amid the pandemic solidified the PC as an essential tool in people's lives.

PC density, including PCs per household, increased during the pandemic, which irreversibly changed the way we focus, create, connect, and care for each other2. In addition, the installed base of PCs per student continues to grow compared to pre-pandemic levels. Commercial growth opportunities also remain as corporations expand the size of their PC fleets, while also replacing older devices. Currently, approximately 200 million commercial devices are more than four years old3. The experience and capabilities delivered on new PCs are dramatically better today, reinforcing the opportunity to drive a refresh cycle among enterprise customers.

As we continue on our strategy to develop more competitive products and more capabilities for customers, we are designing our product roadmap to drive product leadership grounded in a philosophy of openness and choice. We deliver value to our customers by leveraging our engineering capabilities and working with our partners across an open, innovative ecosystem to deliver technology that drives every major vector of the computing experience, including performance, battery life, connectivity, graphics, and form factors to create the most advanced PC platforms.

Products and Competition

We released our 13th Gen Intel Core desktop processors, the second generation of our performance hybrid architecture, which combines efficient-cores and performance-cores to deliver performance and experiences that are scalable across all PC market segments. The 13th Gen processor family is expected to deliver uncompromised computing performance for every PC segment and out to the edge. In total, we expect to deliver more than 500 designs from partners across major multinational corporations and leading manufacturers.

We operate in a particularly competitive market. In processors, we compete with AMD and vendors who design applications processors based on ARM architecture, such as Qualcomm Inc. (Qualcomm), and, increasingly, Apple Inc. (Apple), with its M1 and M2 products. We expect this competitive environment to continue to intensify in 2023.

Our role as a technology leader is more important than ever, and our commitment to creating an open ecosystem is critical to delivering on our ambition. This is why we embrace and collaborate with a vibrant ecosystem of OEM partners to identify innovation vectors and deliver leadership technologies together. The breadth of a robust ecosystem like Microsoft Windows/x86 is a powerful combination, bringing together hundreds of companies around the globe and creative and innovative advancements that are not possible for one company to deliver alone.

Unique to Intel, we innovate beyond the CPU to deliver premium PC experiences with Intel Evo and Intel vPro platforms. More than 150 advanced laptop designs have been built on the Intel Evo platform, and we test and verify these to confirm they deliver key experience indicators such as responsiveness, battery life, instant wake, and connectivity. Intel vPro is designed for enterprise needs and delivers increased productivity improvements, connectivity, security features, and remote manageability.

Through our efforts to increase internal and external capacity, supply availability for our products has improved, which enables us to service our customers in a more consistent and responsive manner. We have also seen near-term improvements in industry-wide constraints, which include improvements in third-party component availability and a stabilization of lead times for those components. We remain committed to further remove bottlenecks of third-party components and prepare for longer term demand growth.

1 Source: Intel calculated 2022 TAM derived from industry analyst reports.

2 Source. Intel calculated PC density from industry analyst reports.

3 Source: Intel calculated volume of devices over four years old from industry analyst reports and internal data.

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Financial Performance

Revenue Summary

2022 vs. 2021

▪Notebook revenue was $18.8 billion, down $6.7 billion from 2021. Notebook unit sales decreased 36%, driven by lower demand in the consumer and education market segments, and notebook ASPs increased 15% due to an increased mix of commercial and consumer products and a lower mix of education products.

▪Desktop revenue was $10.7 billion, down $1.8 billion from 2021. Desktop unit sales decreased 19%, driven by lower demand in the consumer and education market segments, and desktop ASPs increased 5%, primarily from an increased mix of commercial products.

▪Other revenue was $2.3 billion, down $923 million from 2021, primarily driven by the continued ramp down from the exit of our 5G smartphone modem business and lower demand for our wireless and connectivity products.

2021 vs. 2020

▪Notebook revenue increased $546 million. Notebook unit sales increased 8%, driven by consumer and commercial recovery from COVID-19 lows offset by 6% lower ASPs due to strength in consumer and education market segments.

▪Desktop revenue increased $1.3 billion. Desktop unit sales increased 8%, driven by recovery in desktop demand driven by consumer and commercial recovery from COVID-19 lows, and ASP increased 3%, driven by commercial recovery from COVID-19.

▪Other revenue decreased $1.3 billion, primarily driven by the continued ramp down from the exit of our 5G smartphone modem and Home Gateway Platform businesses, partially offset by strength in wireless and connectivity.

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Operating Income Summary

Operating income decreased 60% year over year, and operating margin was 20% in 2022 and 38% in 2021.

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Market and Business Overview

Market Trends and Strategy

Data is a significant force in society and is generated daily at an unprecedented pace. The desire to harness insights from data to drive better outcomes for businesses and society is ever-expanding. AI is nearly pervasive in all applications, creating the potential for intelligence everywhere, and enabling powerful new uses of compute resources across all market segments. The installed base of Intel Xeon processors combined with our rich portfolio of heterogeneous compute solutions (FPGAs, GPUs, IPUs, and AI accelerators) position us to lead in this high-growth area. DCAI is integral to our growth in AI through deep investments in the AI ecosystem, developer tools, frameworks, technologies, and open standards to drive a scalable path forward.

We take a system-level approach that supplies the necessary hardware and software that are optimized for power and performance.

Our technology is differentiated at the system level and in high-growth workloads based on our integrated hardware acceleration engines and software. For example, architected into our Intel Xeon processors are Intel® Advanced Matrix Extensions (Intel® AMX) for AI acceleration; Intel® Software Guard Extensions (Intel® SGX), providing enclaves of protected memory to deliver enhanced security for sensitive data; and Intel® Crypto Acceleration that delivers breakthrough performance across a host of important cryptographic algorithms. This is the type of acceleration and differentiated performance that we believe will continue to drive our value and growth across our customer base.

Products and Competition

Our products and services include:

We offer customers a broad portfolio of silicon and software designed to provide workload-optimized performance. Our hardware portfolio comprises CPUs, domain-specific accelerators, and FPGAs. Each of these is designed to support the performance, agility, and security that our customers demand. This hardware portfolio strategy and investment in complementary software enable users to execute their workloads with low latency and on the most appropriate hardware for their needs.

Our competitors include AMD, providers of GPU products such as NVIDIA, companies developing their own custom silicon, and new entrants developing ARM- and RISC-V-based products customized for specific data center workloads. We expect this competitive landscape to continue.

The Intel Xeon Scalable processor family delivers advanced CPUs for the data center, the network, and edge, driving industry-leading performance, manageability, and security with differentiated features and capabilities. All major hyperscale customers have deployed services using 3rd Gen Intel Xeon processors. The 4th Gen Intel Xeon Scalable processors will ramp up throughout 2023. Our 4th generation introduces new accelerators to provide more options for developers to adapt to changes and optimize for workloads, such as AI, analytics, networking, storage, and high-performance computing.

Our Habana Gaudi AI training accelerator is at the forefront of AI solutions for data centers and in 2022, the second generation of deep learning processors for training and inference were launched with Habana Gaudi2 and Habana Greco. These new processors address an industry gap by providing customers with high-performance, high-efficiency deep learning compute choices for both training workloads and inference deployments in the data center while lowering the AI barrier to entry for companies of all sizes.

Our FPGA and structured ASIC portfolio enhances Intel’s ability to meet the needs of customers in the data center, across the network, and at the edge. We are shipping our Intel Agilex FPGA family, featuring industry-leading FPGA fabric performance, power efficiency, and transceiver performance. We released our Intel eASIC N5X device family (Diamond Mesa) for low-latency 5G network acceleration, hyperscale acceleration and storage, AI, and edge applications. We also introduced an FPGA-based IPU (Oak Springs Canyon) that enables superior security capabilities and allows our hyperscale customers to isolate the infrastructure from the tenant workloads running on Intel Xeon.

The ubiquity of Intel Xeon in the installed base, along with our heterogeneous compute solutions combined with software that unlocks the value of our hardware, enable our customers to develop highly differentiated solutions. Our integrated approach has created significant value for Intel, our customers and our partners by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities to apply our technology to address our customers' and society’s most complex issues.

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Financial Performance

Revenue Summary

2022 vs. 2021

Revenue was $19.2 billion, down $3.5 billion from 2021, due to a decrease in server revenue, partially offset by higher other DCAI revenue. Server volume decreased 16% from 2021, led by enterprise customers in a competitive environment, and due to customers tempering purchases to reduce existing inventories in a softening data center market. Server ASPs decreased 5% from 2021, driven by a higher mix of revenue from hyperscale customers. Other DCAI revenue increased 14% due to growth in our FPGA business.

2021 vs. 2020

Revenue was $22.7 billion, down $722 million, primarily due to lower server revenue, partially offset by increased revenue from other DCAI products. Server volume decreased 4%, driven by an increasingly competitive environment, partially offset by recovery in government and broader market products.

Operating Income Summary

Operating income decreased 73% year over year, and operating margin was 12% in 2022 and 37% in 2021.

Market and Business Overview

Market Trends and Strategy

The Internet is undergoing a shift toward a cloud-to-edge infrastructure, combining unrivaled scale and capacity in the cloud with faster response times at nearby edges. As AI inference is transforming and automating every industry—from factories to smart cities and hospitals—the demand for high-performance computing at the edge has expanded exponentially. Networks are moving toward software, becoming more programmable and flexible.

Our network and edge solutions aim to (1) move the world's networks to run in software on Intel technologies at the core of cloud data centers, the public Internet, and public and private 5G/6G networks; (2) deploy and run software that monitors and controls factories, cities, commerce, energy, and healthcare on Intel technologies; and (3) run every workload at the edge, between the cloud and the end user, whether deployed by a CSP, CoSP, or an alternative service provider.

Products and Competition

With a greater emphasis on systems and solutions designed to harness the growth of data processed at the edge to yield insights, our competitive landscape has shifted beyond application-specific standard product vendors to include cloud, network, and AI computing platform providers.

Today, we speed the deployment of network and edge computing solutions based on our open software frameworks and broad silicon portfolio to address a broad range of applications in many markets.

Cloud Networking: Our cloud customers require uncompromised data center network performance and reliability. Intel® Intelligent Fabric allows customers to program network behavior from end to end, from one Intel Xeon server to the next, through Intel® Ethernet NICs, IPUs, and Ethernet Switch ASICs. This control gives customers the ability to advance and differentiate their cloud infrastructure based on the unique needs of their business. The IPU, a new class of product introduced by Intel, is an open and programmable compute platform that frees up more compute cycles for customers by running infrastructure workloads in a separate, secure, and isolated set of CPU cores. Our Intel® Silicon Photonics Optical Transceivers are the backbone of the data center network, building reliable optical links on an industry-leading manufacturing process.

Telecommunications Networks: Intel led the world’s shift to running networking workloads in software and created network function virtualization, providing customers with more efficient, cost-effective, and programmable platforms. Now we are leading the first wave of 5G core network deployments and demonstrating that 5G base stations can be almost entirely built from software running on Intel Xeon processors with Intel vRAN Boost.

Our growth comes from moving fixed-function networks onto Intel Xeon Scalable processors and Intel Xeon D processors running our FlexCore and FlexRAN™ software. Our customers are tier-one global communication service providers and their equipment suppliers. Our software-based cloud RAN platform allows operators to deploy the fastest cloud-native 5G infrastructure quickly and efficiently at scale to meet the needs of their end customers.

On-premises Edge: More than just a silicon provider, we partner with companies to design and deliver solutions to help a wide range of customers transform their businesses and take advantage of the rapidly increasing number of connected devices and customers. We develop high-performance compute platforms that solve for technology and business use cases that scale across vertical industries and embedded markets such as retail, banking, hospitality, education, manufacturing, energy, healthcare, and medical.

A common architecture from intelligent edge platforms based on our Intel Xeon, Intel Core, Intel Atom and vision processing unit silicon portfolio reduces complexity in the ecosystem and helps our customers create, store, and process data at the edge, analyzing it faster and acting on it sooner. Software frameworks like the OpenVINO toolkit enable software developers to deploy new automation solutions on Intel hardware, particularly for those running AI inference workloads.

Software and Platforms: Our customers’ need for flexibility, programmability, and versatility drives workloads toward software and away from fixed-function hardware. As networking in the cloud, core network, 5G, and private networks move to software, and as our edge customers increasingly deploy AI inference applications, we aim to simplify innovation on Intel hardware. We support our customers with open, containerized software frameworks, such as Intel® Smart Edge, the OpenVINO toolkit, and the Infrastructure Programmer Developer Kit, enabling the network to continue to improve and evolve without locking customers into a single solution. Intel Geti software is designed to enable teams to rapidly develop AI models, and its intuitive computer vision solution is designed to reduce the time needed to build models by easing the complexities of model development and harnessing greater collaboration between teams at the edge.

Financial Performance

Revenue Summary

2022 vs. 2021

Revenue was $8.9 billion, up $897 million from 2021, driven by higher Ethernet ASPs and increased demand for 5G products, partially offset by lower demand for Network Xeon. Ethernet demand declined in Q4 2022 due to lower server demand, and Edge demand declined in Q4 2022 due to macroeconomic factors.

2021 vs. 2020

Revenue was $8.0 billion, up $844 million, primarily driven by higher demand for Edge products amid recovery from the economic impacts of COVID-19, as well as a recovery in cloud networking revenue. These increases were partially offset by a reduction in the 5G networking volume from elevated levels in 2020.

Operating Income Summary

Operating income decreased 57% year over year, and operating margin was 8% in 2022 and 21% in 2021.

Market and Business Overview

Market Trends and Strategy

While the automotive industry has moderately recovered from the effects of the COVID-19 pandemic and from acute supply chain shortages, with approximately 6% growth in global vehicle production year over year, production in 2022 was still roughly 8% below 2019 levels. We expect ADAS volumes to continue to grow faster than overall global vehicle production in the coming years and anticipate long-term ADAS growth from continued increases in the percentage of vehicles that are equipped with basic ADAS features from the factory. In addition to potential volume growth, our portfolio of advanced solutions has the potential to drive higher average system price over time.

Beyond ADAS solutions, we believe that the availability of AVs will cause a significant transformation in mobility, including vehicle ownership and utilization. We expect that AV technology will eventually be accessed by consumers through shared-vehicle MaaS networks and in consumer-owned and operated AVs. We are pursuing this market trend by using our eyes-on/hands-off Mobileye SuperVision* solution as a baseline to scale to our eyes-off/hands-off Chauffeur* consumer AV product in a variety of operational design domains. As it relates to AMaaS, we intend to primarily go to market by supplying Mobileye Drive* self-driving system to transportation network companies, public transit operators, and suppliers of AV-ready vehicle platforms. In some cases, we expect to bundle our Mobileye Drive self-driving system with Moovit’s urban mobility and transit intelligence application and its global user base.

Products and Competition

We currently ship a variety of ADAS solutions to a large number of global automakers. We are recognized for our top-rated safety solutions globally, and since 2007, we have introduced numerous industry-first ADAS products.

We are building a robust portfolio of end-to-end ADAS and autonomous driving solutions to provide the capabilities needed for the future of autonomous driving, leveraging a comprehensive suite of purpose-built software and hardware technologies. We pioneered “base” ADAS features to enhance vehicle safety and to meet global regulatory requirements and safety ratings with our driver assist solution and we have since created new categories of ADAS with our cloud-enhanced driver assist and premium driver assist offerings such as Mobileye SuperVision*. By leveraging Mobileye SuperVision’s full-surround computer vision and True Redundancy*, we are developing Chauffeur, our consumer AV solution and Mobileye Drive, our Level 4 autonomous driving solution designed for fleet deployment. Though our current offerings to Tier 1 and OEM customers do not include cameras, radars, lidar systems, or other sensors (except in particular cases), we have radar and lidar products that are currently in advanced development stages, which we intend to offer to customers in the future.

The ADAS and autonomous driving industries are highly competitive. In the ADAS and consumer AV market, we face competition primarily from other external providers, including Tier 1 automotive suppliers and silicon providers, and in-house solutions developed by OEMs. Our Tier 1 customers may be developing or may in the future develop competing solutions. In the autonomous driving market, including AMaaS and consumer AV, we face competition from technology companies; internal development teams from the automakers themselves, sometimes in combination with investments in early-stage autonomous vehicle technology companies, Tier 1 automotive companies, and robotaxi providers.

Financial Performance

Revenue and Operating Income Summary

2022 vs. 2021

Revenue was $1.9 billion, up $483 million from 2021, primarily driven by higher demand for EyeQ products and Mobileye SuperVision* systems. Operating income was $690 million, up $136 million from 2021, primarily due to higher revenue, partially offset by increased investments in leadership products.

2021 vs. 2020

Revenue was $1.4 billion, up $419 million, driven by improvement in global vehicle production, recovery from the economic impacts of COVID-19, and increasing adoption of ADAS compared to 2020. Operating income was $554 million, up $231 million, due to higher revenue driven by improvement in global vehicle production, recovery from the economic impacts of COVID-19, and increasing adoption of ADAS compared to 2020.

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Market and Business Overview

Market Trends and Strategy

We are surrounded by immersive and visual content. Technology has made great advances in computer graphics, gaming and media, and AI supercomputing technologies that have enabled us to push toward simulating everything. The pursuit of simulating everything is driving the demand for accelerated computing. To address that opportunity, we are developing products that cover gaming and content creation, and that can enable consumers to experience immersive, photo-realistic virtual worlds. Our high-performance computing products are intended to power supercomputers that simulate our world from submicron levels to the entire galaxy. We are also building tailored products and have custom design services that we believe will unlock additional market opportunities.

We leverage Intel’s expansive portfolio of IP cores and technologies, from our process and packaging to our x86 architecture and a rich set of open software tools, libraries, drivers, and operating systems. We build upon the core foundation and combine our scalable Xe Architecture and acceleration IP blocks to address the accelerated computing market.

Products and Competitiveness

We operate in a very competitive market. NVIDIA is a competitor in the GPU and CPU market for high-performance computing and AI, as well as graphics solutions for content creation and gaming. AMD is also a competitor in the client and server segments with its line of GPUs and CPUs. CSPs are both customers and indirect competitors as they integrate vertically.

Our advanced and groundbreaking Xe Architecture excels at rendering content and accelerating computing that scales from the client to the data center. We empower the industry with open and scalable toolkits and software libraries that enable heterogeneous compute through our oneAPI programming model. Intel Arc graphics is our high-performance graphics offering for gaming, content creation, and emerging opportunities to enable persistent and immersive computing. To provide a valuable user experience and bring Intel Arc graphics to market, we work with hundreds of software partners to deliver games and applications that are designed to work seamlessly with our products. We also collaborate with the ecosystem to integrate new functionality and features that take advantage of both our hardware and software technologies to boost performance and enable high-quality rendering and fluid frame rates.

High-performance computing takes advantage of our CPUs and GPUs to power supercomputers that tackle the most computationally challenging problems of our increasingly complex world. Today, many of the world’s supercomputers are based on Intel Xeon processors. Our CPU roadmap strategy is to build upon this foundation and extend to higher compute and memory bandwidth for workloads with increasingly large data sets.

Our flagship data center GPU, Ponte Vecchio, is designed to take on the most demanding AI and high-performance computing workloads. Combining Ponte Vecchio with Intel Xeon processors can supercharge a platform’s compute density. Our oneAPI cross-architecture programming model is architected to leverage the broad software ecosystem of Intel Xeon processors so that software developers can work across a range of CPUs and accelerators with a single code base.

With a rich portfolio and a strong roadmap for leadership in visual computing, supercomputing, and custom computing, we have a unique opportunity to define the future of computing and accelerate growth for Intel.

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Financial Performance

Revenue and Operating Income (Loss) Summary

2022 vs. 2021

Revenue was $837 million, up $63 million from 2021. We had an operating loss of $1.7 billion, compared to an operating loss of $1.2 billion in 2021, due to increased inventory reserves taken and investments in our product roadmap.

2021 vs. 2020

Revenue was $774 million, up $123 million primarily due to increased demand for our integrated graphics portfolio. We had an operating loss of $1.2 billion, compared to an operating loss of $403 million in 2020, primarily driven by a charge incurred on a federal contract of $333 million and ongoing investments in the business.

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Market and Business Overview

Market Trends and Strategy

The chip industry is undergoing a structural transformation driven by:

▪The digitization of everything, accelerated by the five superpowers: compute, pervasive connectivity, cloud-to-edge infrastructure, AI, and sensing.

▪A generational shift in computer architectures: a move from SoC to chiplets, increased tailoring of chips to workloads, and instruction set diversification.

▪The vertical integration into chip making by OEMs and CSPs.

▪Increasing costs of R&D and capacity for advanced node technologies.

▪Supply chain risk highlighted by the pandemic and geo-political issues.

These transformation trends are driving significant semiconductor market growth in leading-edge advanced nodes driven by Mobile, Compute, and Automotive applications. The increasing heterogeneity of chips increases the complexity of designing chips with optimized PPAC that are manufacturable with high yield. Additionally, integrating these diverse chips into systems becomes more complex and requires optimized interconnects and a software stack that can easily accept this diversity of chips without compromising PPAC. This is causing a paradigm shift from focusing on optimizing devices to focusing on optimizing the system, known as system technology co-optimization. In this new paradigm, customers require solutions that address every layer of the application stack, rather than just the chip itself.

Additionally, the COVID-19 pandemic and recent geo-political issues have highlighted the world’s dependence on semiconductors and the vulnerable supply chain that underpins the industry. Approximately 88% of the world’s semiconductor manufacturing capacity is in Asia, and only 4.5% is in the US1.

Products and Competition

We seek to address this tectonic shift in the industry by creating an open system foundry that enables our customers to lead in their industries by creating full-stack solutions from their choice of the best of Intel and the ecosystem. The open system foundry has four components: wafer fabrication, packaging, chiplet standard, and software. The open system foundry involves engaging with customers at multiple levels, from basic wafer manufacturing to helping define and implement their desired system architecture. We intend to build our customers' silicon design and deliver full end-to-end capabilities to produce their products, built with our advanced packaging technology and delivered from a resilient, geo-diverse and sustainable source of supply.

The foundation of our IFS strategy is a world-class foundry offering consisting of process technologies complemented by a robust ecosystem for IP, EDA, and design services. Chips created with IFS can be packaged using our advanced packaging technologies or by OSATs and connected by optimized interconnects that we will help drive as standard for the industry, such as, UCIe. We expect to accelerate our customers' designs by providing services and software that leverage our vast experience in designing systems of chips, and by providing cores from Intel and the ecosystem that are optimized for Intel process technologies. The combination of cores and accelerators can be seamlessly integrated into systems using oneAPI. These offerings will accelerate customer time to value with PPAC-optimized systems delivered from a reliable supply chain.

Our competitors are mostly pure-play foundries that focus on delivering a pure-play foundry offering from fabrication plants based in Asia. Of the five major semiconductor foundries, Taiwan Semiconductor Manufacturing Corporation (TSMC), Samsung, Global Foundries (GF), United Microelectronics Corporation (UMC) and Semiconductor Manufacturing International Corporation, only Samsung is an IDM and foundry, and only GF is headquartered in the US. TSMC and Samsung are the only companies with advanced technologies below 10nm, and TSMC leads the market with 53% market share, followed by Samsung at 18% in 20212. Neither Samsung nor TSMC currently offer its most advanced nodes outside of Asia and both have limited advanced-node capacity in the US.

We believe the open system foundry model will deliver differentiated capabilities to help our customers lead in their industries while bringing stability to the global semiconductor supply chain. The interest we are seeing from customers demonstrates that our strategy and offerings are resonating, and we look to continue to build on this in 2023 and in prospective periods.

1Source: 2022 Gartner Worldwide Foundry Capacity Forecast by Region, 2020-2026.

2Source: TrendForce.

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Financial Performance

Revenue and Operating Income (Loss) Summary

2022 vs. 2021

Revenue was $895 million, up $109 million from 2021, primarily driven by higher sales of MBMW tools. We had an operating loss of $320 million, compared to an operating loss of $23 million from 2021, primarily due to increased spending to drive strategic growth.

2021 vs. 2020

Revenue was $786 million, up $71 million from 2020, primarily due to higher revenue from certain design services. We had an operating loss of $23 million, compared to operating income of $45 million in 2020, due to ongoing investments in the business.

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Consolidated Results of Operations

For additional key highlights of our results of operations, see "A Year in Review."