Quarterly report pursuant to Section 13 or 15(d)

Operating Segments

Operating Segments
9 Months Ended
Oct. 01, 2022
Segment Reporting [Abstract]  
Operating Segments
Note 2 : Operating Segments
We previously announced several organizational changes that would accelerate the execution and innovation of our Company by allowing us to capture growth in both large traditional markets and high-growth emerging markets. This includes reorganization of our business units to capture this growth and to provide increased transparency, focus and accountability. As a result, we modified our segment reporting in the first quarter of 2022 to align to the previously-announced business reorganization. All prior-period segment data has been retrospectively adjusted to reflect the way our CODM internally receives information, and manages and monitors our operating segment performance starting in fiscal year 2022.
We now manage our business through the following operating segments:
Client Computing (CCG)
Datacenter and AI (DCAI)
Network and Edge (NEX)
Accelerated Computing Systems and Graphics (AXG)
Intel Foundry Services (IFS)
We derive a substantial majority of our revenue from our principal products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package, which is based on Intel® architecture.
CCG, DCAI and NEX are our reportable operating segments. AXG, Mobileye, and IFS 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. AXG revenue includes integrated graphics royalties from our CCG and NEX operating segments and are recorded as if the sales or transfers were to third parties at prices that approximate market-based selling prices. When we enter into federal contracts, they are aligned to the sponsoring operating segment.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.
We have an "all other" category that includes revenue, expenses, and charges such as:
historical results of operations from divested businesses;
results of operations of start-up businesses that support our initiatives;
amounts included within restructuring and other charges;
employee benefits, compensation, impairment charges, and other expenses not allocated to the operating segments (beginning the first quarter of 2022, this includes all of our stock-based compensation); and
acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
The CODM, who is our CEO, allocates resources to and assesses the performance of each operating segment using information about the operating segment's revenue and operating income (loss). The CODM does not evaluate operating segments using discrete asset information and we do not identify or allocate assets by operating segments. Based on the interchangeable nature of our manufacturing and assembly and test assets, most of the related depreciation expense is not directly identifiable within our operating segments, as it is included in overhead cost pools and subsequently absorbed into inventory as each product passes through our manufacturing process. Because our products are then sold across multiple operating segments, it is impracticable to determine the total depreciation expense included as a component of each operating segment's operating income (loss) results. We do not allocate gains and losses from equity investments, interest and other income, share-based compensation, or taxes to our operating segments. Although the CODM uses operating income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. The accounting policies for segment reporting are the same as for Intel as a whole. There have been no changes to our segment accounting policies disclosed in our 2021 Form 10-K except for the organizational changes and the change in allocation of stock-based compensation expense described above.
Net revenue and operating income (loss) for each period were as follows:
Three Months Ended Nine Months Ended
(In Millions)
Oct 1, 2022 Sep 25, 2021 Oct 1, 2022 Sep 25, 2021
Operating segment revenue:
Client Computing
Desktop $ 3,222  $ 3,119  $ 8,152  $ 8,682 
Notebook 4,410  5,944  15,119  19,634 
Other 492  725  1,812  2,448 
8,124  9,788  25,083  30,764 
Datacenter and AI 4,209  5,778  14,892  16,265 
Network and Edge 2,266  1,986  6,812  5,890 
Accelerated Computing Systems and Graphics 185  171  590  529 
Mobileye 450  326  1,304  1,030 
Intel Foundry Services 171  174  576  541 
All other 67  1,133  166  3,986 
Total operating segment revenue $ 15,472  $ 19,356  $ 49,423  $ 59,005 
Operating income (loss):
Client Computing $ 1,655  $ 3,592  $ 5,567  $ 11,909 
Datacenter and AI 17  2,293  1,917  6,089 
Network and Edge 75  511  682  1,359 
Accelerated Computing Systems and Graphics (378) (222) (1,275) (566)
Mobileye 142  127  480  431 
Intel Foundry Services (103) (44) (289) (26)
All other (1,583) (1,030) (3,616) (4,729)
Total operating income (loss) $ (175) $ 5,227  $ 3,466  $ 14,467 
The following table presents intersegment revenue before eliminations:
Total operating segment revenue $ 15,472  $ 19,356  $ 49,423  $ 59,005 
Less: Accelerated Computing Systems and Graphics intersegment revenue (134) (164) (411) (509)
Total net revenue $ 15,338  $ 19,192  $ 49,012  $ 58,496 
In the first nine months of 2022, we initiated the wind-down of our Intel Optane memory business, which is part of our DCAI operating segment. While Intel Optane is a leading technology, it was not aligned to our strategic priorities. Separately, we continue to embrace the CXL standard. As a result, we recognized an inventory impairment of $559 million in Cost of sales on the Consolidated Condensed Statements of Income in the first nine months of 2022. The impairment charge is recognized as a Corporate charge in the "all other" category presented above. As we wind down the Intel Optane business, we expect to continue to meet existing customer commitments.