Document

OPERATING INCOME

DILUTED EPS

CASH FLOWS

■ PC-CENTRIC $B
■ DATA-CENTRIC $B

■ GAAP $B ■ NON-GAAP $B

■ GAAP ■ NON-GAAP

■ OPERATING CASH FLOW $B
■ FREE CASH FLOW $B

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	March 28, 2020



	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 000-06217

INTEL CORPORATION

(Exact name of registrant as specified in its charter)



	Delaware		94-1672743
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
2200 Mission College Boulevard,	Santa Clara,	California	95054-1549
(Address of principal executive offices)			(Zip Code)

(408) 765-8080

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	INTC	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	Accelerated filer	Non-accelerated filer	Smaller reporting company	Emerging growth company
☑	¨	¨	☐	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of March 28, 2020, the registrant had outstanding 4,234 million shares of common stock.

TABLE OF CONTENTS

THE ORGANIZATION OF OUR QUARTERLY REPORT ON FORM 10-Q

The order and presentation of content in our Form 10-Q differs from the traditional SEC Form 10-Q format. Our format is designed to improve readability and better presents how we organize and manage our business. See "Form 10-Q Cross-Reference Index" within Other Key Information for a cross-reference index to the traditional SEC Form 10-Q format. To reflect our focus on transforming from a PC-centric¹ company to a data-centric company, we have presented our data-centric businesses¹ first in the "Segment Trends and Results" within MD&A.

We have defined certain terms and abbreviations used throughout our Form 10-Q in "Key Terms" within the Consolidated Condensed Financial Statements and Supplemental Details.

The preparation of our Consolidated Condensed Financial Statements is in conformity with U.S. GAAP. Our Form 10-Q includes key metrics that we use to measure our business, some of which are non-GAAP measures. See "Non-GAAP Financial Measures" within MD&A for an explanation of these measures and why management uses them and believes they provide investors with useful supplemental information.



		Page
FORWARD-LOOKING STATEMENTS		1
OUR PANDEMIC RESPONSE		2
A QUARTER IN REVIEW		5
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND SUPPLEMENTAL DETAILS
	Consolidated Condensed Statements of Income	6
	Consolidated Condensed Statements of Comprehensive Income	7
	Consolidated Condensed Balance Sheets	8
	Consolidated Condensed Statements of Cash Flows	9
	Consolidated Condensed Statements of Stockholders' Equity	10
	Notes to Consolidated Condensed Financial Statements	11
	Key Terms	26

MANAGEMENT'S DISCUSSION AND ANALYSIS
	Segment Trends and Results	27
	Consolidated Results of Operations	32
	Liquidity and Capital Resources	36
	Contractual Obligations	37
	Quantitative and Qualitative Disclosures about Market Risk	37
	Non-GAAP Financial Measures	38

OTHER KEY INFORMATION
	Risk Factors	40
	Controls and Procedures	43
	Issuer Purchases of Equity Securities	43
	Exhibits	44
	Form 10-Q Cross-Reference Index	45


¹	Intel's definition is included in "Key Terms" within the Consolidated Condensed Financial Statements and Supplemental Details.

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipate," "expect," "intend," "pledge," "committed," "plans," "opportunities," "future," "believes," "target," "on-track," "estimates," "continue," "likely," "may," "will," "would," "should," "could," and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to future responses to and effects of COVID-19; projections of our future financial performance and demand; our anticipated growth and trends in our businesses or operations; projected growth and trends in markets relevant to our businesses; future products and technology and the expected availability and benefits of such products and technology; expectations regarding construction projects; expected timing and impact of acquisitions, divestitures, and other significant transactions; expected completion of restructuring activities; availability, uses, sufficiency, and cost of capital and capital resources, including expected returns to stockholders such as dividends and share repurchases; accounting estimates and judgments regarding reported matters, events and contingencies and the actual results thereof; future production capacity and product supply, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-K for the year ended December 28, 2019, particularly the "Risk Factors" sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Unless specifically indicated otherwise, the forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, including expectations based on third-party information and projections that management believes to be reputable, and Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.

Intel, the Intel logo, 3D XPoint, Intel Atom, Intel Core, Intel Optane, and Xeon, are trademarks of Intel Corporation or its subsidiaries in the U.S. and/or other countries.

* Other names and brands may be claimed as the property of others.



		1

Table of Contents

OUR PANDEMIC RESPONSE

Our top priority during the COVID-19 pandemic is protecting the health and safety of our employees. As governments institute new restrictions on commercial operations, we are working to ensure our compliance while also maintaining business continuity for essential operations in our factories. At this time, our factories continue to operate around the world in accordance with guidance issued by local and national government authorities. We remain open as we support our employees who work in labs and factories critical to our world’s digital infrastructure.

For the first three months of 2020 we observed strong notebook platform demand driven by the increase in working and learning from home and saw continued strength in data center demand as cloud service providers increased capacity. However, weakness in the industrial and retail verticals drove weaker demand in our IOTG business.

Our technology runs most of the world’s internet, communications, and government digital infrastructures, and our products and capabilities are delivering vital computing power for medical research, robotics for assisted patient care, and artificial intelligence and data analytics for public health. Our platforms that support telemedicine have also taken on greater importance since the outbreak of COVID-19 as hospitals and healthcare workers scale to meet the increasing demand for care. The PCs and networking technologies that we and our customers deliver are supporting the unprecedented volume of remote workers and enabling personal connections while social distancing.

We are focused on protecting the health and safety of our employees and we continue to operate to deliver for our customers while contributing to our communities.

OUR EMPLOYEES

Intel’s Pandemic Leadership Team, established more than 15 years ago to improve Intel’s crisis management response capability, is deeply engaged to keep our employees safe. This specialized team includes medical and safety experts who work to safeguard the well-being of employees and minimize the spread of infection. They also collaborate with local governments and public health organizations and implement their recommendations. In the past, the team has successfully helped us manage through global health issues such as bird flu, SARS, Ebola, Zika, and the H1N1 virus.

Working-from-home and social distancing policies. As we navigate through the effects of the COVID-19 pandemic we are working to ensure compliance with orders and restrictions imposed by government authorities. We have significantly reduced the number of people in our offices, helping to protect our employees who work in our labs and factories and who are essential to keeping our business running. Maintaining safe facilities is core to how we operate, and we are implementing additional practices in our fabs and assembly test plants so manufacturing employees can safely continue performing critical work on site. In addition to increased cleaning of our facilities, our manufacturing sites are taking extra steps to effectively implement social distancing. Some of these measures include staggering shift changes, adjusting meeting locations and schedules, limiting activities that require close proximity, and making thermometers and masks available (in addition to the normal protective gear worn by many factory employees). At our construction sites, we are working closely with our general contractors to implement social distancing, increased cleaning, and other protocols to safeguard the health of all workers on site.

Compensation and expanded benefits. We are investing more than $100 million in additional benefits to aid and support employees, including special recognition for employees that have been working on-site and healthcare coverage changes under the U.S. Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Employees and contractors asked to work from home or self-quarantine due to travel restrictions will be paid their regular pay, and Intel will reimburse up to 30 days of care services for employees who need backup childcare and/or elder care in the case where there are school or care center closures or if an employee or family member is required to be self-quarantined.

To aid in the overall well-being of our employees, we also have our existing global Employee Assistance Plan that provides confidential counseling and work-life services to employees and immediate family members.

OUR CUSTOMERS

We are in the midst of what is likely a historic deployment of remote work and digital access to services. We are committed to our customers to enable the support they need to continue providing vital services, tools, and infrastructure to millions.

Operations. Our factories continue to operate world-wide in compliance with the orders and restrictions imposed by government authorities in each of our locations, and we are working with our customers to meet their specific shipment needs. Our world-class safety standards have to date allowed our factories to continue to operate safely and with mostly on-time deliveries. We only allow employees in our factories who are essential to the factories’ operations. By design, our “cleanrooms” and factories are among the cleanest places in the world. While most of our construction projects have remained operational, we temporarily paused a few projects due to local government restrictions at a small number of our sites. We currently expect these interruptions to have minimal impact on our product ramps and do not expect them to impact our process technology transition timelines. We remain on-track to add sufficient wafer capacity this year to meet anticipated market demand and restore our PC unit inventory levels.



OUR PANDEMIC RESPONSE		2

Table of Contents

Supply chain. Our employees and partners around the world have collaborated and leveraged lessons learned—in recent months and from past challenges—to safely keep the global tech supply chain functioning. Our Pandemic Leadership Team is at the center of these efforts and through our Business Continuity Program we perform ongoing work with our suppliers to review their preparations to handle sudden disruptions to the supply chain. We have taken several actions throughout the pandemic to address our supply chain. For example:


•	Where feasible and practicable, we increased inventory of raw materials as well as our supply of our finished goods coming out of China in early February. It is our practice to plan for scenarios where supply will be restricted or compromised in our supply chain for 30-60 days or more.


•	We activated backup planning to reroute and obtain charter flights if needed into and from China, securing capacity early. As the virus spread, we leveraged the successful methodology used in China for other parts of Asia and Europe.


•	We evaluated the end-to-end supply line needs for all products ramping this year, worked on securing supply lines and deployed our business continuity plans to mitigate potential risks.

We are working with governments around the world to confirm our compliance with local requirements for continued operation as an essential business. We have also worked closely with our suppliers to help protect their employees' health and safety, to provide supplier assistance to mitigate supply disruptions, and to clarify our continued expectations for labor practices and human rights in line with the Responsible Business Alliance Code of Conduct.

OUR COMMUNITY

Intel has a longstanding commitment to support the local communities where we operate and to create a better world through the power of our technology. We have committed over $60 million to accelerate access to technology needed to combat the crisis and to support the needs of frontline healthcare workers and people in our local communities. We've also been inspired by our employees who have proposed innovative ideas for how we can apply our resources and technology to support our stakeholders throughout this crisis.

Using our technology to help. In April, we pledged $50 million in a Pandemic Response Technology Initiative to combat COVID-19 through accelerating access to technology at the point of patient care, speeding scientific research, and ensuring access to online learning for students. A portion of this amount has been allocated to an additional innovation fund that supports requests from external partners and employee-led relief projects where access to Intel expertise and resources can have immediate impact. This initiative builds on prior announcements of $10 million in donations that are supporting local communities during this critical time.

We are providing access to our intellectual property and partnering with customers to put technology to work towards understanding and fighting COVID-19. For example:


•	We are giving COVID-19 scientists and researchers free access to our worldwide intellectual property portfolio. We will continue to invent—and protect—our intellectual property, but we offer it freely to those working to protect people from this pandemic.


•	We are teaming with Lenovo and BGI Genomics to accelerate the analysis of genomic characteristics of COVID-19. Our combined work will further advance the capabilities of BGI’s sequencing tools to help scientists investigate transmission patterns of the virus and create better diagnostic methods.


•	We are deploying Intel platform-based robots in hospitals to protect doctors and nurses by transporting medical supplies and surgical equipment to reduce human-to-human interactions.


•	We are working with Dyson and medical consultancy firm TTP to supply FPGAs for CoVent, a new ventilator specifically designed in response to the U.K. government’s request for help.


•	We are collaborating with Medtronic to add remote monitoring capabilities to their PB980 ventilator, which helps reduce exposure for healthcare providers treating COVID-19 patients.

Philanthropic efforts. We are also committed to providing monetary and non-monetary support to our communities. For example:


•	We committed a $1 million donation to the International Red Cross to support global relief efforts for the COVID-19 pandemic.


•	We announced the Intel Foundation is providing $4 million to support COVID-19 relief efforts in communities where we have significant presence. The foundation also offered a special monetary matching opportunity for every regular full-time and part-time employee and U.S. Intel retiree up to a total of $2 million for relief efforts around major Intel sites.


•	We donated more than 1 million items of personal protective equipment—masks, gloves, and other gear—to healthcare workers that were sourced from our factory stock and emergency supplies.


•	We also joined the global XPRIZE Pandemic Alliance along with other companies to fuel collaboration on solutions through shared innovation to effectively address the immediate needs of the crisis.



OUR PANDEMIC RESPONSE		3

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MOVING FORWARD

There is uncertainty around the impacts the pandemic will have on our business and the additional measures that may be necessary going forward. We will continue to actively monitor the situation, including the status of our workforce and factories, supply chain, and customers, suppliers, and vendors, to determine the appropriate actions to protect the health and safety of our employees and our ongoing operations for our customers. This includes actions informed by the requirements and recommendations of the federal, state or local authorities.

Economic and demand uncertainty in the current environment may impact our future results. We continue to assess how the effects of COVID-19 on the economy may offset the immediate catalysts from more remote work and learning, and we recognize that our operations could be disrupted if our employees working in our fabs and factories contract the virus. We expect continued strength from cloud service providers and communications service providers in the second quarter of 2020, and anticipate enterprise and government demand to weaken in the second half of 2020. We also expect lower demand in IOTG and Mobileye for the rest of the year. As global GDP estimates are revised down, we expect PC TAM to decline in the second half of the year. We remain focused on cash flow management, including careful management of operating expenses, capital expenditures, and working capital.



OUR PANDEMIC RESPONSE		4

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A QUARTER IN REVIEW

Total revenue of $19.8 billion was up $3.8 billion year over year as our data-centric businesses and PC-centric business grew by 34% and 14% respectively. Data-centric revenue was up, driven by growth across all DCG business market segments, strong mix of high-performance Intel^® Xeon^® processors, NSG bit growth, and improved NAND pricing. Our PC-centric business was up, driven by notebook platform¹ volume strength and higher modem sales. Increased platform unit sales, ASP strength, and lower period charges resulted in higher gross margins and operating income, partially offset by higher platform unit cost. In the first three months we generated $6.2 billion of cash flow from operations and returned $5.6 billion to stockholders, including $1.4 billion in dividends and $4.2 billion in buybacks.

$19.8B

$7.0B

$7.5B

$1.31

$1.45

$6.2B

$2.9B

GAAP

non-GAAP²

GAAP

non-GAAP²

GAAP

non-GAAP²

Revenue up $3.8B or 23% from Q1 2019

Operating income up $2.9B or 69% from Q1 2019; Q1 2020 operating margin at 35%

Operating income up $3.0B or 67% from Q1 2019; Q1 2020 operating margin at 38%

Diluted EPS up $0.44 or 51% from Q1 2019

Diluted EPS up $0.56 or 63% from Q1 2019

Operating cash flow up $1.2B or 24% from Q1 2019

Free cash flow up $1.3B or 76% from Q1 2019

Growth in most data-centric businesses and growth in the PC-centric business

Higher gross margin from increase in platform unit sales and platform ASP strength, lower period charges, NAND market recovery and improved NAND unit cost, partially offset by increase in platform unit cost

Higher platform volume, platform ASP strength, lower period charges, NAND market recovery and improved unit cost, and lower shares outstanding, partially offset by higher platform unit cost and higher tax

Higher net income offset by working capital changes driven by other assets and liabilities and accounts receivable

BUSINESS SUMMARY


•	We introduced a broad, data-centric portfolio for 5G network infrastructure including the new Intel Atom^® P5900, a 10nm SoC for wireless base stations; a next-generation structured ASIC for 5G network acceleration; and the launch of new 2nd Gen Intel^® Xeon^® Scalable processors.


•	We announced the 10th Gen Intel^® Core^™ H-series mobile processors, a new family of mobile processors aimed at gamers and creators everywhere, which deliver faster performance with up to 5.3GHz Turbo, eight cores, and 16 threads.


•	We experienced growth in most data-centric businesses. DCG grew across all segments and adjacencies continued to ramp. NSG grew with record revenue driven by NAND and Intel^®Optane™ memory bit growth and higher ASP. Mobileye recognized record revenue with increasing ADAS adoption. IOTG declined on COVID-19 impact.


•	PC-centric growth was driven by notebook demand strength as consumers and businesses are relying on PCs for working and learning at home.


¹	See "Key Terms" within Consolidated Condensed Financial Statements and Supplemental Details.


²	See "Non-GAAP Financial Measures" within MD&A.



A QUARTER IN REVIEW		5

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CONSOLIDATED CONDENSED STATEMENTS OF INCOME



	Three Months Ended
(In Millions, Except Per Share Amounts; Unaudited)	Mar 28, 2020			Mar 30, 2019
Net revenue	$	19,828		$	16,061
Cost of sales	7,812			6,972
Gross margin	12,016			9,089
Research and development	3,275			3,332
Marketing, general and administrative	1,541			1,583
Restructuring and other charges	162			—
Operating expenses	4,978			4,915
Operating income	7,038			4,174
Gains (losses) on equity investments, net	(111		)	434
Interest and other, net	(313		)	(61		)
Income before taxes	6,614			4,547
Provision for taxes	953			573
Net income	$	5,661		$	3,974
Earnings per share—basic	$	1.33		$	0.88
Earnings per share—diluted	$	1.31		$	0.87
Weighted average shares of common stock outstanding:
Basic	4,266			4,492
Diluted	4,312			4,564

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Income	6

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CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended
(In Millions; Unaudited)	Mar 28, 2020			Mar 30, 2019
Net income	$	5,661		$	3,974
Changes in other comprehensive income, net of tax:
Net unrealized holding gains (losses) on derivatives	(268		)	102
Actuarial valuation and other pension benefits (expenses), net	12			9
Translation adjustments and other	(5		)	50
Other comprehensive income (loss)	(261		)	161
Total comprehensive income	$	5,400		$	4,135

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Comprehensive Income	7

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CONSOLIDATED CONDENSED BALANCE SHEETS



(In Millions)	Mar 28, 2020			Dec 28, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	11,380		$	4,194
Short-term investments	1,296			1,082
Trading assets	8,127			7,847
Accounts receivable	8,455			7,659
Inventories	9,246			8,744
Other current assets	2,997			1,713
Total current assets	41,501			31,239
Property, plant and equipment, net of accumulated depreciation of $75,686 ($73,321 as of December 28, 2019)	56,770			55,386
Equity investments	3,880			3,967
Other long-term investments	2,943			3,276
Goodwill	26,276			26,276
Identified intangible assets, net	10,429			10,827
Other long-term assets	5,911			5,553
Total assets	$	147,710		$	136,524

Liabilities, temporary equity, and stockholders’ equity
Current liabilities:
Short-term debt	$	3,464		$	3,693
Accounts payable	4,638			4,128
Accrued compensation and benefits	2,358			3,853
Other accrued liabilities	13,435			10,636
Total current liabilities	23,895			22,310
Debt	36,455			25,308
Contract liabilities	1,353			1,368
Income taxes payable, non-current	4,651			4,919
Deferred income taxes	2,027			2,044
Other long-term liabilities	2,975			2,916
Contingencies (Note 12)
Temporary equity	—			155
Stockholders’ equity:
Preferred stock	—			—
Common stock and capital in excess of par value, 4,234 issued and outstanding (4,290 issued and outstanding as of December 28, 2019)	25,251			25,261
Accumulated other comprehensive income (loss)	(1,541		)	(1,280		)
Retained earnings	52,644			53,523
Total stockholders’ equity	76,354			77,504
Total liabilities, temporary equity, and stockholders’ equity	$	147,710		$	136,524

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Balance Sheets	8

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS



	Three Months Ended
(In Millions; Unaudited)	Mar 28, 2020			Mar 30, 2019

Cash and cash equivalents, beginning of period	$	4,194		$	3,019
Cash flows provided by (used for) operating activities:
Net income	5,661			3,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	2,623			2,229
Share-based compensation	449			389
Amortization of intangibles	427			396
(Gains) losses on equity investments, net	134			(274		)
Changes in assets and liabilities:
Accounts receivable	(796		)	(235		)
Inventories	(548		)	(512		)
Accounts payable	117			196
Accrued compensation and benefits	(1,500		)	(1,620		)
Prepaid supply agreements	(87		)	(228		)
Income taxes	753			440
Other assets and liabilities	(1,075		)	204
Total adjustments	497			985
Net cash provided by operating activities	6,158			4,959
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment	(3,268		)	(3,321		)
Purchases of available-for-sale debt investments	(513		)	(872		)
Maturities and sales of available-for-sale debt investments	625			948
Purchases of trading assets	(3,897		)	(1,869		)
Maturities and sales of trading assets	3,660			1,554
Sales of equity investments	20			1,077
Other investing	(363		)	(239		)
Net cash used for investing activities	(3,736		)	(2,722		)
Cash flows provided by (used for) financing activities:
Increase (decrease) in short-term debt, net	—			1,682
Issuance of long-term debt, net of issuance costs	10,247			135
Repayment of debt and debt conversion	(1,075		)	(861		)
Proceeds from sales of common stock through employee equity incentive plans	503			290
Repurchase of common stock	(4,229		)	(2,530		)
Payment of dividends to stockholders	(1,408		)	(1,414		)
Other financing	726			596
Net cash provided by (used for) financing activities	4,764			(2,102		)
Net increase (decrease) in cash and cash equivalents	7,186			135
Cash and cash equivalents, end of period	$	11,380		$	3,154

Supplemental disclosures of noncash investing activities and cash flow information:
Acquisition of property, plant, and equipment included in accounts payable and accrued liabilities	$	2,294		$	2,259
Cash paid during the period for:
Interest, net of capitalized interest	$	67		$	109
Income taxes, net of refunds	$	211		$	125

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Cash Flows	9

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CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY



	Common Stock and Capital in Excess of Par Value					Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
(In Millions, Except Per Share Amounts; Unaudited)	Shares		Amount			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Three Months Ended

Balance as of December 29, 2019	4,290		$	25,261		$	(1,280	)	$	53,523		$	77,504
Net income	—		—			—			5,661			5,661
Other comprehensive income (loss)	—		—			(261		)	—			(261		)
Employee equity incentive plans and other	17		620			—			—			620
Share-based compensation	—		449			—			—			449
Temporary equity reduction	—		155			—			—			155
Convertible debt	—		(750		)	—			—			(750		)
Repurchase of common stock	(71	)	(420		)	—			(3,689		)	(4,109		)
Restricted stock unit withholdings	(2	)	(64		)	—			(32		)	(96		)
Cash dividends declared ($0.66 per share)	—		—			—			(2,819		)	(2,819		)
Balance as of March 28, 2020	4,234		$	25,251		$	(1,541	)	$	52,644		$	76,354

Balance as of December 28, 2018	4,516		$	25,365		$	(974	)	$	50,172		$	74,563
Net income	—		—			—			3,974			3,974
Other comprehensive income (loss)	—		—			161			—			161
Employee equity incentive plans and other	11		372			—			—			372
Share-based compensation	—		389			—			—			389
Temporary equity reduction	—		145			—			—			145
Convertible debt	—		(592		)	—			—			(592		)
Repurchase of common stock	(49	)	(278		)	—			(2,172		)	(2,450		)
Restricted stock unit withholdings	(1	)	(55		)	—			(17		)	(72		)
Cash dividends declared ($0.63 per share)	—		—			—			(2,829		)	(2,829		)
Balance as of March 30, 2019	4,477		$	25,346		$	(813	)	$	49,128		$	73,661

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Stockholders' Equity	10

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 1 :	BASIS OF PRESENTATION

We prepared our interim Consolidated Condensed Financial Statements that accompany these notes in conformity with U.S. GAAP, consistent in all material respects with those applied in our Form 10-K for the fiscal year ended December 28, 2019.

We have made estimates and judgments affecting the amounts reported in our Consolidated Condensed Financial Statements and the accompanying notes. The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This report should be read in conjunction with the Consolidated Financial Statements in our 2019 Form 10-K where we include additional information about our policies and the methods and assumptions used in our estimates.



NOTE 2 :	OPERATING SEGMENTS

We manage our business through the following operating segments:


•	DCG


•	IOTG


•	Mobileye


•	NSG


•	PSG


•	CCG

We derive a substantial majority of our revenue from platform products, which are our principal products and considered as one class of product. We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package. Platform products are used in various form factors across our DCG, IOTG, and CCG operating segments. Our non-platform, or adjacent products, can be combined with platform products to form comprehensive platform solutions to meet customer needs.

DCG and CCG are our reportable operating segments. IOTG, Mobileye, NSG, and PSG do not meet the quantitative thresholds to qualify as reportable operating segments; however, we have elected to disclose the results of these non-reportable operating segments. Our Internet of Things portfolio, presented as Internet of Things, is comprised of IOTG and Mobileye operating segments.

We have an “all other” category that includes revenue, expenses, and charges such as:


•	results of operations from non-reportable segments not otherwise presented;


•	historical results of operations from divested businesses;


•	results of operations of start-up businesses that support our initiatives, including our foundry business;


•	amounts included within restructuring and other charges;


•	a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and


•	acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.

The CODM, who is our CEO, does not evaluate operating segments using discrete asset information. Operating segments do not record inter-segment revenue. We do not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. Except for these differences, the accounting policies for segment reporting are the same as for Intel as a whole.



FINANCIAL STATEMENTS	Notes to Financial Statements	11

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Net revenue and operating income (loss) for each period were as follows:



	Three Months Ended
(In Millions)	Mar 28, 2020			Mar 30, 2019
Net revenue:
Data Center Group
Platform	$	6,427		$	4,482
Adjacent	566			420
	6,993			4,902
Internet of Things
IOTG	883			910
Mobileye	254			209
	1,137			1,119

Non-Volatile Memory Solutions Group	1,338			915
Programmable Solutions Group	519			486
Client Computing Group
Platform	8,712			7,824
Adjacent	1,063			762
	9,775			8,586

All other	66			53
Total net revenue	$	19,828		$	16,061

Operating income (loss):
Data Center Group	$	3,492		$	1,841

Internet of Things
IOTG	243			251
Mobileye	88			68
	331			319

Non-Volatile Memory Solutions Group	(66		)	(297		)
Programmable Solutions Group	97			89
Client Computing Group	4,225			3,072
All other	(1,041		)	(850		)
Total operating income	$	7,038		$	4,174



FINANCIAL STATEMENTS	Notes to Financial Statements	12

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Disaggregated net revenue for each period was as follows:



	Three Months Ended
(In Millions)	Mar 28, 2020		Mar 30, 2019
Platform revenue
DCG platform	$	6,427	$	4,482
IOTG platform	795		825
CCG Desktop platform	2,840		2,886
CCG Notebook platform	5,857		4,926
CCG other platform¹	15		12
	15,934		13,131

Adjacent revenue²	3,894		2,930
Total revenue	$	19,828	$	16,061


¹	Includes our tablet and service provider revenue.


²	Includes all of our non-platform products for DCG, IOTG, and CCG such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, and PSG products.

Planned Divestiture of our Home Gateway Platform Division

We signed a definitive agreement on April 5, 2020 to sell the majority of Home Gateway Platform, a division of CCG. The transaction contemplates the transfer of certain employees, equipment, and an on-going supply agreement for future units. We reclassified the assets and liabilities as held-for-sale within other current assets/liabilities. We expect to close the transaction in the third quarter of 2020.



NOTE 3 :	EARNINGS PER SHARE

We computed basic earnings per share of common stock based on the weighted average number of shares of common stock outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.



	Three Months Ended
(In Millions, Except Per Share Amounts)	Mar 28, 2020		Mar 30, 2019
Net income available to common stockholders	$	5,661	$	3,974
Weighted average shares of common stock outstanding—basic	4,266		4,492
Dilutive effect of employee equity incentive plans	46		53
Dilutive effect of convertible debt	—		19
Weighted average shares of common stock outstanding—diluted	4,312		4,564
Earnings per share—basic	$	1.33	$	0.88
Earnings per share—diluted	$	1.31	$	0.87

Potentially dilutive shares of common stock from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed issuance of common stock under the stock purchase plan.

In January 2020, we fully redeemed the remaining principal of our 2009 Debentures. We included our 2009 Debentures in the calculation of diluted earnings per share of common stock in 2019 by applying the treasury stock method because the average market price was above the conversion price.

Securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share in all periods presented.



FINANCIAL STATEMENTS	Notes to Financial Statements	13

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NOTE 4 :	CONTRACT LIABILITIES



(In Millions)	Mar 28, 2020		Dec 28, 2019
Prepaid supply agreements	$	1,718	$	1,805
Other	271		236
Total contract liabilities	$	1,989	$	2,041

Contract liabilities are primarily related to prepayments received from customers on long-term prepaid supply agreements toward future NSG product delivery. The short-term portion of contract liabilities is reported on the Consolidated Condensed Balance Sheets within other accrued liabilities.

The following table shows the changes in contract liability balances relating to long-term prepaid supply agreements during the first three months of 2020:



(In Millions)
Prepaid supply agreements balance as of December 28, 2019	$	1,805
Prepayments utilized	(87		)
Prepaid supply agreements balance as of March 28, 2020	$	1,718

If new long-term prepaid supply agreements are entered into and performance obligations are negotiated, this component of the contract liability balance will increase, and as customers purchase product and utilize their prepaid balances, the balance will decrease.

The timing and amount of future anticipated revenues from these agreements may vary from our expectations due to changes in supply, demand, and market pricing.



NOTE 5 :	OTHER FINANCIAL STATEMENT DETAILS

INVENTORIES



(In Millions)	Mar 28, 2020		Dec 28, 2019
Raw materials	$	877	$	840
Work in process	6,654		6,225
Finished goods	1,715		1,679
Total inventories	$	9,246	$	8,744

INTEREST AND OTHER, NET

The components of interest and other, net for each period were as follows:



	Three Months Ended
(In Millions)	Mar 28, 2020			Mar 30, 2019
Interest income	$	93		$	135
Interest expense	(135		)	(138		)
Other, net	(271		)	(58		)
Total interest and other, net	$	(313	)	$	(61	)

Interest expense in the preceding table is net of $83 million of interest capitalized in the first three months of 2020 ($125 million in the first three months of 2019).



FINANCIAL STATEMENTS	Notes to Financial Statements	14

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NOTE 6 :	RESTRUCTURING AND OTHER CHARGES

A restructuring program was approved in the first quarter of 2020 to further align our workforce with our continuing investments in the business and execute the planned divestiture of Home Gateway Platform, a division of CCG. We expect these actions to be substantially complete in the third quarter of 2020.

Restructuring and other charges by type for the period were as follows:



	Three Months Ended
(In Millions)	Mar 28, 2020
Employee severance and benefit arrangements	$	105
Asset impairment and other charges	57
Total restructuring and other charges	$	162



NOTE 7 :	INVESTMENTS

DEBT INVESTMENTS

Trading Assets

Net losses related to trading assets still held at the reporting date were $231 million in the first three months of 2020 ($16 million of net gains in the first three months of 2019). Net gains on the related derivatives were $100 million in the first three months of 2020 ($2 million of net gains in the first three months of 2019).

Available-for-Sale Debt Investments



	March 28, 2020									December 28, 2019
(In Millions)	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate debt	$	3,656	$	46	$	(9	)	$	3,693	$	2,914	$	44	$	—		$	2,958
Financial institution instruments	9,482		12		(2		)	9,492		3,007		15		(1		)	3,021
Government debt	748		11		(1		)	758		560		4		—			564
Total available-for-sale debt investments	$	13,886	$	69	$	(12	)	$	13,943	$	6,481	$	63	$	(1	)	$	6,543

Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits. Substantially all time deposits were issued by institutions outside the U.S. as of March 28, 2020 and December 28, 2019.

The fair value of available-for-sale debt investments, by contractual maturity, as of March 28, 2020, was as follows:



(In Millions)	Fair Value
Due in 1 year or less	$	3,443
Due in 1–2 years	1,589
Due in 2–5 years