Intel : Earnings Release

Intel Corporation

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

News Release

Intel Reports Third-Quarter 2021 Financial Results

News Summary

• Third-quarterGAAP revenue of $19.2 billion, up 5% year over year (YoY), and non-GAAP revenue of $18.1 billion, up 5% YoY. Achieved all-time record revenue in Intel's Internet of Things Group (IOTG) and record third- quarter revenue in the Data Center Group (DCG) and Mobileye businesses.
• Third-quarterGAAP earnings-per-share (EPS) was $1.67; non-GAAP EPS was $1.71, which exceeded July guidance by $0.61. Exceeded July guidance for EPS and gross margin.
• Raising full-year 2021 EPS and gross margin guidance. Now expecting GAAP EPS of $4.50 and non-GAAP EPS of $5.28 and GAAP gross margin of 55% and non-GAAP gross margin of 57%1.
• Intel CFO George Davis announced plans to retire in May 2022.

SANTA CLARA, Calif., October 21, 2021 -- Intel Corporation today reported third-quarter 2021 financial results.

"Q3 shone an even greater spotlight on the global demand for semiconductors, where Intel has the unique breadth and scale to lead. Our focus on execution continued as we started delivering on our IDM 2.0 commitments. We broke ground on new fabs, shared our accelerated path to regain process performance leadership, and unveiled our most dramatic architectural innovations in a decade. We also announced major customer wins across every part of our business," said Pat Gelsinger, Intel CEO. "We are still in the early stages of our journey, but I see the enormous opportunity ahead, and I couldn't be prouder of the progress we are making towards that opportunity."

Q3 2021 Financial Highlights

		GAAP				Non-GAAP
	Q3 2021	Q3 2020	vs. Q3 2020		Q3 2021	Q3 2020	vs. Q3 2020
Revenue ($B)	$19.2	$18.3	up 5%	$18.1	$17.3	up 5%
Gross Margin	56.0%	53.1%	up 2.9 ppt	57.8%	56.5%	up 1.3 ppt
R&D and MG&A ($B)	$5.5	$4.7	up 16%	$5.3	$4.5	up 17%
Operating Margin	27.2%	27.6%	down 0.4 ppt	28.8%	30.4%	down 1.7 ppt
Tax Rate	0.5%	15.2%	down 14.7 ppt	0.4%	15.4%	down 15 ppt
Net Income ($B)	$6.8	$4.3	up 60%	$7.0	$4.5	up 54%
Earnings Per Share	$1.67	$1.02	up 64%	$1.71	$1.08	up 59%

In the third quarter, the company generated $9.9 billion in cash from operations and paid dividends of $1.4 billion.

Intel CFO George Davis announced plans to retire from Intel in May 2022. He will continue to serve in his current role while Intel conducts a search for a new CFO and until his successor is appointed.

• Non-GAAPresults and business outlook exclude the NAND memory business, which is subject to a pending divestiture. Year-over-year non- GAAP comparisons also exclude NAND from 2020 results. Full reconciliations between GAAP and non-GAAP measures are provided below.

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Business Unit Summary

Key Business Unit Revenue and Trends		Q3 2021		vs. Q3 2020
CCG		$9.7 billion		down	2%
DCG		$6.5 billion		up	10%
Internet of Things
IOTG		$1.0 billion		up	54%
Mobileye		$326 million		up	39%
NSG		$1.1 billion		down	4%
PSG		$478 million		up	16%

Third-quarter revenue was led by strong recovery in the Enterprise portion of DCG and in IOTG, which saw higher demand amid recovery from the economic impacts of COVID-19. The Client Computing Group (CCG) was down due to lower notebook volumes due to industry-wide component shortages, and on lower adjacent revenue, partially offset by higher average selling prices (ASPs) and strength in desktop.

Business Highlights

• Selected by the U.S. government to provide commercial foundry services for the government's RAMP-C program.
• Announced Amazon as first customer to use Intel Foundry Services' packaging services, and a partnership with Qualcomm to use the future Intel 20A process technology.
• Broke ground on two new leading-edge chip factories at Intel's Ocotillo campus in Chandler, Arizona, three months ahead of schedule.
• Shared process and packaging roadmap updates for delivering five nodes within four years, putting Intel on a path to restore process performance per watt parity in 2024 and leadership in 2025 with key process innovations, including RibbonFET and PowerVia. Also introduced new advanced packaging technologies, Foveros Omni and Foveros Direct, for 2023.
• Detailed Intel's biggest architectural shifts in a generation with the first in-depth look at Alder Lake, our first performance hybrid architecture with two new generations of x86 cores; Sapphire Rapids, our new standard- setting data center architecture; our new discrete gaming graphics processing unit architecture; new infrastructure processing units; and Ponte Vecchio, our tour-de-force GPU architecture with Intel's highest ever compute density to accelerate AI, HPC, and advanced analytics workloads.
• Introduced the new Intel Arc brand for our upcoming high-performance graphics products, covering hardware and software, and services.
• Introduced four new Intel Core processor-based Surface design wins with Microsoft, including the first Surface device to be Intel® Evo™ platform verified, and two designs that bring Thunderbolt connectivity to the Surface lineup.
• Announced availability of the 3rd Gen Intel® Xeon® Scalable processor (Ice Lake) for AWS customers via the new Amazon Elastic Compute Cloud (Amazon EC2) M6i instances and for Google Cloud customers via the new Compute Engine N2
• Announced U.S. Department of Energy selected next-generation Intel Xeon Scalable processors (Sapphire Rapids) to power supercomputers.
• Announced strategic global partnerships with ZEEKR and Sixt SE and additional plans to unveil Mobileye's robotaxi equipped with the Mobileye Drive™ system.
• Introduced second-generation neuromorphic research chip, Loihi 2, fabricated with a pre-production version of the Intel 4 process.

As part of its IDM 2.0 strategy, Intel will be making a series of product and technology announcements at its upcoming Innovation virtual event on October 27-28,2021. The conference is designed for developers, industry insiders, and will feature technical sessions on Intel's AI, 5G, edge, cloud connectivity, and client applications. Join the public webcast and follow the news at newsroom.intel.com at 9 a.m. PDT on Wednesday, October 27th, 2021. Additional information regarding Intel's results can be found in the Q3'21 Earnings Presentation available at: www.intc.com.

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Business Outlook

Intel's guidance for the fourth quarter and full year includes both GAAP and non-GAAP estimates. Our non-GAAP measures exclude the NAND memory business, which is subject to a previously-announced pending sale, as well as certain other items. Reconciliations between GAAP and non-GAAP financial measures are included below.

Q4 2021		GAAP			Non-GAAP
			Approximately			Approximately
Revenue		$19.2 billion			$18.3 billion
Gross Margin	51.4%		53.5%
Tax rate	37%		13%
Earnings per share	$0.78		$0.90
Full-Year 2021			GAAP				Non-GAAP
			Approximately			Approximately
Revenue		$77.7 billion			$73.5 billion
Gross Margin	55%		57%
Tax rate	15%		9%
Earnings per share	$4.50		$5.28
Full-year capital spending		$18.0-19.0 billion			$18.0-19.0 billion^
Free cash flow		N/A			$12.5 billion

Actual results may differ materially from Intel's Business Outlook as a result of, among other things, the factors described under "Forward-Looking Statements" below.

Earnings Webcast

Intel will hold a public webcast at 2 p.m. PDT today to discuss the results for its third quarter of 2021. The live public webcast can be accessed on Intel's Investor Relations website at www.intc.com. The Q3'21 Earnings Presentation, webcast replay, and audio download will also be available on the site.

Intel plans to report its earnings for the fourth quarter of 2021 on January 26, 2022 promptly after close of market; related materials will be available at www.intc.com. A public webcast of Intel's earnings conference call will follow at 2 p.m. PDT at www.intc.com.

Investor Meeting

Intel's Investor Meeting is now planned for February 17, 2022. On today's earnings webcast, Intel will provide additional information regarding its long-term outlook and plans.

^ No adjustment on a non-GAAP basis.

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Forward-Looking Statements

Intel's Business Outlook and other statements in this release that refer to future plans and expectations are forward- looking statements that involve a number of risks and uncertainties. Words such as "anticipates," "expects," "intends," "goals," "plans," "guidance," "believes," "seeks," "estimates," "continues," "committed," "on-track," "may," "will," "would," "should," "could," "accelerate," "ramp," "deliver," "path," "roadmap," "progress," "forecast," "likely," "future," "potential," "positioned," "increasing," "opportunity," "upcoming" and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to Intel's strategy; manufacturing expansion and investment plans; plans and goals related to Intel's foundry business; supply expectations, including regarding industry shortages and sufficiency of future supply; pending transactions, including the pending sale of our NAND memory business; total addressable market (TAM) and market opportunity; business plans and financial expectations; future macroeconomic conditions; future legislation; future impacts of the COVID-19 pandemic; future products, technology, and services, and the expected availability and benefits of such products, technology, and services, including product ramps, manufacturing goals, plans, timelines, and future progress, future process nodes and technologies including Intel 20A, RibbonFET, and PowerVia, process performance parity and leadership expectations, future product architectures, Alder Lake, Sapphire Rapids, and future GPU and IPU products; expectations regarding customers, including with respect to designs, wins, orders, and partnerships; projections regarding competitors; and anticipated trends in our businesses or the markets relevant to them, including with respect to future demand and industry growth, also identify forward-looking statements. All forward-looking statements included in this release are based on management's expectations as of the date of this release and, except as required by law, Intel disclaims any obligation to update these forward- looking statements to reflect future events or circumstances. Forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Intel presently considers the following to be among the important factors that can cause actual results to differ materially from the company's expectations.

• Demand for Intel's products is highly variable and can differ from expectations due to factors including changes in business and economic conditions; customer confidence or income levels, and the levels of customer capital spending; the introduction, availability, and market acceptance of Intel's products, products used together with Intel products, and competitors' products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; changes in customer needs and emerging technology trends; and changes in the level of inventory and computing capacity at customers.
• Intel's results can vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources, including as a result of ongoing industry shortages of components and substrates; product manufacturing quality/yields; and changes in capital requirements and investment plans. Variations in results can also be caused by the timing of Intel product introductions and related expenses, including marketing programs, and Intel's ability to respond quickly to technological developments and to introduce new products or incorporate new features into existing products, as well as decisions to exit product lines or businesses, which can result in restructuring and asset impairment charges.
• Intel's results can be affected by adverse economic, social, political, regulatory, and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including recession or slowing growth, military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns (including the COVID-19 pandemic), fluctuations in currency exchange rates, sanctions and tariffs, political disputes, changes in government grants and incentives, and continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad. Results can also be affected by the formal or informal imposition by countries of new or revised export and/or import and doing-business regulations, including changes or uncertainty related to the U.S. government entity list and changes in the ability to obtain export licenses, which can be changed without prior notice.

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• The COVID-19 pandemic has previously adversely affected significant portions of Intel's business and could have a material adverse effect on Intel's financial condition and results of operations. The pandemic has resulted in authorities imposing numerous measures to try to contain the virus. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. Restrictions on our manufacturing or support operations or workforce, or similar limitations for our vendors and suppliers, can impact our ability to meet customer demand and could have a material adverse effect on us. Restrictions or disruptions of transportation, or disruptions in our customers' operations and supply chains, may adversely affect our results of operations. The pandemic has caused us to modify our business practices. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of our key personnel and harm our ability to perform critical functions. The pandemic has significantly increased economic and demand uncertainty. Demand for our products could be materially harmed in the future. The pandemic could lead to increased disruption and volatility in capital markets and credit markets, which could adversely affect our liquidity and capital resources. The degree to
  which COVID-19 impacts our results will depend on future developments, which are highly uncertain. The impact of the pandemic can also exacerbate other risks discussed in this section.
• Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term. In addition, we have entered new areas and introduced adjacent products, such as our intention to become a major provider of foundry services, and we face new sources of competition and uncertain market demand or acceptance of our offerings with respect to these new areas and products, and they do not always grow as projected.
• Intel's expected tax rate is based on current tax law, including current interpretations of the Tax Cuts and Jobs Act of 2017 (TCJA), and current expected income and can be affected by changes in interpretations of TCJA and other laws; changes in the volume and mix of profits earned and location of assets across jurisdictions with varying tax rates; changes in the estimates of credits, benefits, and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets.
• Intel's results can be affected by gains or losses from equity securities and interest and other, which can vary depending on gains or losses on the change in fair value, sale, exchange, or impairments of equity and debt investments, interest rates, cash balances, and changes in fair value of derivative instruments.
• Product defects or errata (deviations from published specifications) can adversely impact our expenses, revenues, and reputation.
• We or third parties regularly identify security vulnerabilities with respect to our processors and other products as well as the operating systems and workloads running on them. Security vulnerabilities and any limitations of, or adverse effects resulting from, mitigation techniques can adversely affect our results of operations, financial condition, customer relationships, prospects, and reputation in a number of ways, any of which may be material, including incurring significant costs related to developing and deploying updates and mitigations, writing down inventory value, a reduction in the competitiveness of our products, defending against product claims and litigation, responding to regulatory inquiries or actions, paying damages, addressing customer satisfaction considerations, or taking other remedial steps with respect to third parties. Adverse publicity about security vulnerabilities or mitigations could damage our reputation with customers or users and reduce demand for our products and services.
• Cybersecurity incidents, whether or not successful, can affect Intel's results by causing us to incur significant costs or disrupting our operations or those of our customers and suppliers, and can result in reputational harm.
• Intel's results can be affected by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, commercial, disclosure, and other issues, as well as by the impact and timing of settlements and dispute resolutions. For example, in the first quarter of 2021, Intel accrued a $2.2 billion charge related to litigation involving VLSI Technology LLC (VLSI). An unfavorable ruling can include monetary damages or an injunction prohibiting us from manufacturing or selling one or more products, precluding particular business practices, impacting our ability to design products, or requiring other remedies such as compulsory licensing of intellectual property.