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	~~June 29, 2019~~ 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 ~~June 29, 2019,~~March 28, 2020, the registrant had outstanding ~~4,430~~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 ~~Quarterly Report on~~ Form 10-Q ~~(Form 10-Q)~~ differs from the traditional ~~U.S. Securities and Exchange Commission (SEC)~~SEC Form 10-Q format. ~~We believe that our~~Our format ~~improves~~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 ~~consolidated financial statements~~our Consolidated Condensed Financial Statements is in conformity with U.S. ~~generally accepted accounting principles (GAAP). We have included~~GAAP. Our Form 10-Q includes key metrics that we use to measure our business, some of which are non-GAAP measures. See ~~these~~ "Non-GAAP Financial Measures" within ~~Other Key Information.~~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		25
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND SUPPLEMENTAL DETAILS
	Consolidated Condensed Statements of Income	36
	Consolidated Condensed Statements of Comprehensive Income	47
	Consolidated Condensed Balance Sheets	58
	Consolidated Condensed Statements of Cash Flows	69
	Consolidated Condensed Statements of Stockholders' Equity	710
	Notes to Consolidated Condensed Financial Statements	811
	Key Terms	26

MANAGEMENT'S DISCUSSION AND ANALYSIS ~~(MD&A)~~
	~~Overview~~Segment Trends and Results	2127
	~~Revenue, Gross Margin, and Operating Expenses~~	22
	~~Business Unit Trends and Results~~	25
	~~Other~~ Consolidated Results of Operations	3132
	Liquidity and Capital Resources	3236
	Contractual Obligations	37
	Quantitative and Qualitative Disclosures about Market Risk	3337
	Non-GAAP Financial Measures	38

OTHER KEY INFORMATION
	Risk Factors	3440
	Controls and Procedures	35
	~~Non-GAAP Financial Measures~~	3543
	Issuer Purchases of Equity Securities	3643
	Exhibits	3744
	Form 10-Q Cross-Reference Index	3845


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 ~~"anticipates,~~"anticipate," ~~"expects,~~"expect," ~~"intends,~~"intend," ~~"goals,~~"pledge," "committed," "plans," "opportunities," "future," "believes," ~~"seeks,~~"target," "on-track," "estimates," ~~"continues,~~"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 ofand trends in markets relevant to our ~~businesses,~~businesses; future products and technology and the expected availability and benefits of such products and ~~technology,~~technology; expectations regarding construction projects; expected timing and impact of acquisitions, divestitures, and other significant ~~transactions,~~transactions; expected completion of restructuring ~~activities,~~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 ~~29, 2018,~~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. ~~The~~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 ~~had~~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 UNIQUE TERMS~~

~~We use specific terms throughout this document to describe our business and results. Below are key terms and how we define them:~~



~~PLATFORM PRODUCTS~~		~~A microprocessor (processor or central processing unit (CPU)) and chipset, a stand-alone System-on-Chip (SoC), or a multichip package, based on Intel~~^® ~~architecture. Platform products, or platforms, are primarily used in solutions sold through the Client Computing Group (CCG), Data Center Group (DCG), and Internet of Things Group (IOTG) segments.~~

~~ADJACENT PRODUCTS~~		All of our non-platform products for CCG, DCG, and IOTG, such as modem, Ethernet and silicon photonics, as well as Mobileye, Non-Volatile Memory Solutions Group (NSG), and Programmable Solutions Group (PSG) products. Combined with our platform products, adjacent products form comprehensive platform solutions to meet customer needs.

~~PC-CENTRIC BUSINESS~~		~~Our CCG business, including both platform and adjacent products.~~

~~DATA-CENTRIC BUSINESSES~~		~~Our DCG, Internet of Things (IOTG and Mobileye), NSG, PSG, and all other businesses.~~

Intel, the Intel logo, 3D XPoint, Intel Atom, Intel Core, Intel Optane, ~~Thunderbolt,~~and Xeon, ~~3D NAND and 3D XPoint~~ 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

Table of Contents

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

Table of Contents

A QUARTER IN REVIEW

Total revenue of ~~$16.5~~$19.8 billion ~~declined~~was up $3.8 billion year over year as our data-centric businesses ~~were down 7%; this was partially offset~~and PC-centric business grew by ~~1% growth in our PC-centric business.~~34% and 14% respectively. Data-centric revenue was ~~down compared to a year ago as cloud customers absorbed capacity, data center total addressable~~up, driven by growth across all DCG business market ~~(TAM) for the quarter contracted in the enterprise~~segments, strong mix of high-performance Intel^® Xeon^® processors, NSG bit growth, and ~~government market segment, China demand weakened, and~~improved NAND ~~pricing remained under pressure.~~pricing. Our PC-centric business was up, driven by ~~average selling price (ASP)~~notebook platform¹ volume strength ~~with richer commercial segment mix~~ and higher modem ~~growth. PC client volume declined on small core supply constraint partially offset by sales pull-ins by customers in anticipation of tariff impacts. Lower~~sales. Increased platform unit sales, ASP strength, and ~~further margin compression on memory products~~lower period charges resulted in ~~lower~~higher gross margins and operating income, ~~which was~~ partially offset by ~~executing the quarter with continued operating margin leverage~~.higher platform unit cost. In the first ~~six~~three months we generated ~~$12.5~~$6.2 billion of cash flow from operations and returned $~~8.4~~5.6 billion to stockholders, including $~~2.8~~1.4 billion in dividends and $~~5.6~~4.2 billion in buybacks.

$16.5B $4.6B $5.1B $0.92 $1.06
GAAP GAAP
non-GAAP¹
GAAP
non-GAAP¹
down $457M or 3% from Q2 2018 down $656M or 12% from Q2 2018 down $460M or 8% from Q2 2018 down $0.13 or 12% from Q2 2018 up $0.02 or 2% from Q2 2018

Declines in data-centric businesses generally, partially offset by growth in PC-centric business and Internet of Things Lower gross margin from decrease in platform unit sales and NAND pricing degradation, partially offset by CPU ASP strength Impact from lower platform volume, and NAND pricing pressure, partially offset by the receipt of McAfee, Inc. dividend, as well as lower shares outstanding

$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 ~~have maintained an intense, company-wide focus on improving execution while accelerating innovation. We began shipping our 10 nanometer (nm)-based 10th generation~~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^® ~~Core™~~Xeon^® Scalable processors.

•

We announced the 10th Gen Intel^® Core^™ H-series mobile processors, ~~code-named Ice Lake. These processors feature~~ a new ~~core architecture~~family of mobile processors aimed at gamers and ~~are expected~~creators everywhere, which deliver faster performance with up to ~~deliver increased graphics performance~~5.3GHz Turbo, eight cores, and artificial intelligence and new levels of integrated connectivity for thin-and-light laptops and 2-in-1s. We also shared more details about our Project Athena platform innovation program to help the PC ecosystem create advanced laptops that meet ambitious key experience indicators in performance, responsiveness, battery life, form factor, and artificial intelligence.16 threads.

At our 2019 Investor Meeting, we shared details on our 7nm process technology and the expected performance gains resulting from a combination of technical innovations across six pillars — process and packaging, architecture, memory, interconnect, security, and software — giving insight into the design and engineering model steering our product development.

DCG experienced challenges as cloud customers absorbed capacity and the enterprise and government TAM declined. NSG declined as industry-wide pricing pressure for NAND intensified. However, demand for edge compute drove double digit revenue growth for Mobileye and IOTG.


•	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 ~~in our commercial market segment,~~ as well as adjacencies led by modem. Platform volumes declined in the first half of 2019 compared to first half of 2018 as we experienced small core supply constraints. We continued to invest in capacity expansionconsumers and businesses are relying on PCs for ~~14nm production, improving our supply in the second half of 2019.~~working and learning at home.

In July, we signed an agreement to divest the majority of our smartphone modem business, including certain employees, intellectual property, equipment and leases. The transaction enables us to increase the focus of our 5G efforts on the broader opportunity to modernize network and edge infrastructure, and is expected to close in the fourth quarter of 2019. We also acquired Barefoot Networks, an emerging leader in Ethernet switch silicon and software for use in data center.

¹~~See "Non-GAAP Financial Measures" within Other Key Information.~~


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		25

Table of Contents

CONSOLIDATED CONDENSED STATEMENTS OF INCOME


	Three Months Ended						Six Months Ended					Three Months Ended
(In Millions, Except Per Share Amounts; Unaudited)	Jun 29, 2019			Jun 30, 2018			Jun 29, 2019			Jun 30, 2018		Mar 28, 2020			Mar 30, 2019
Net revenue	$	16,505		$	16,962		$	32,566		$	33,028	$	19,828		$	16,061
Cost of sales	6,627			6,543			13,599			12,878		7,812			6,972
Gross margin	9,878			10,419			18,967			20,150		12,016			9,089
Research and development	3,438			3,371			6,770			6,682		3,275			3,332
Marketing, general and administrative	1,589			1,725			3,122			3,625		1,541			1,583
Restructuring and other charges	184			—			184			—		162			—
Amortization of acquisition-related intangibles	50			50			100			100
Operating expenses	5,261			5,146			10,176			10,407		4,978			4,915
Operating income	4,617			5,273			8,791			9,743		7,038			4,174
Gains (losses) on equity investments, net	170			(203		)	604			440		(111		)	434
Interest and other, net	(63		)	459			(124		)	357		(313		)	(61		)
Income before taxes	4,724			5,529			9,271			10,540		6,614			4,547
Provision for taxes	545			523			1,118			1,080		953			573
Net income	$	4,179		$	5,006		$	8,153		$	9,460	$	5,661		$	3,974
Earnings per share – basic	$	0.94		$	1.08		$	1.82		$	2.03
Earnings per share – diluted	$	0.92		$	1.05		$	1.79		$	1.98
Earnings per share—basic												$	1.33		$	0.88
Earnings per share—diluted												$	1.31		$	0.87
Weighted average shares of common stock outstanding:
Basic	4,466			4,649			4,479			4,661		4,266			4,492
Diluted	4,523			4,747			4,543			4,768		4,312			4,564

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Income	36

Table of Contents

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended					Six Months Ended					Three Months Ended
(In Millions; Unaudited)	Jun 29, 2019		Jun 30, 2018			Jun 29, 2019		Jun 30, 2018			Mar 28, 2020			Mar 30, 2019
Net income	$	4,179	$	5,006		$	8,153	$	9,460		$	5,661		$	3,974
Changes in other comprehensive income, net of tax:
Net unrealized holding gains (losses) on derivatives	151		(293		)	253		(174		)	(268		)	102
Actuarial valuation and other pension benefits (expenses), net	8		(122		)	17		26			12			9
Translation adjustments and other	32		9			82		(13		)	(5		)	50
Other comprehensive income (loss)	191		(406		)	352		(161		)	(261		)	161
Total comprehensive income	$	4,370	$	4,600		$	8,505	$	9,299		$	5,400		$	4,135

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Comprehensive Income	47

Table of Contents

CONSOLIDATED CONDENSED BALANCE SHEETS


(In Millions)	Jun 29, 2019			Dec 29, 2018			Mar 28, 2020			Dec 28, 2019
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,867		$	3,019		$	11,380		$	4,194
Short-term investments	2,414			2,788			1,296			1,082
Trading assets	6,663			5,843			8,127			7,847
Accounts receivable	6,233			6,722			8,455			7,659
Inventories	8,696			7,253			9,246			8,744
Other current assets	2,366			3,162			2,997			1,713
Total current assets	29,239			28,787			41,501			31,239
Property, plant and equipment, net of accumulated depreciation of $69,227 ($65,342 as of December 29, 2018)	51,377			48,976
Property, plant and equipment, net of accumulated depreciation of $75,686 ($73,321 as of December 28, 2019)							56,770			55,386
Equity investments	4,629			6,042			3,880			3,967
Other long-term investments	3,577			3,388			2,943			3,276
Goodwill	24,583			24,513			26,276			26,276
Identified intangible assets, net	11,249			11,836			10,429			10,827
Other long-term assets	6,105			4,421			5,911			5,553
Total assets	$	130,759		$	127,963		$	147,710		$	136,524

Liabilities, temporary equity, and stockholders’ equity
Current liabilities:
Short-term debt	$	3,726		$	1,261		$	3,464		$	3,693
Accounts payable	4,682			3,824			4,638			4,128
Accrued compensation and benefits	2,554			3,622			2,358			3,853
Other accrued liabilities	8,743			7,919			13,435			10,636
Total current liabilities	19,705			16,626			23,895			22,310
Debt	25,089			25,098			36,455			25,308
Contract liabilities	1,558			2,049			1,353			1,368
Income taxes payable, non-current	4,847			4,897			4,651			4,919
Deferred income taxes	1,783			1,665			2,027			2,044
Other long-term liabilities	2,583			2,646			2,975			2,916
Contingencies (Note 12)
Temporary equity	247			419			—			155
Stockholders’ equity:
Preferred stock	—			—			—			—
Common stock and capital in excess of par value, 4,430 issued and outstanding (4,516 issued and outstanding as of December 29, 2018)	25,140			25,365
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)	(622		)	(974		)	(1,541		)	(1,280		)
Retained earnings	50,429			50,172			52,644			53,523
Total stockholders’ equity	74,947			74,563			76,354			77,504
Total liabilities, temporary equity, and stockholders’ equity	$	130,759		$	127,963		$	147,710		$	136,524

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Balance Sheets	58

Table of Contents

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


	Six Months Ended						Three Months Ended
(In Millions; Unaudited)	Jun 29, 2019			Jun 30, 2018			Mar 28, 2020			Mar 30, 2019

Cash and cash equivalents, beginning of period	$	3,019		$	3,433		$	4,194		$	3,019
Cash flows provided by (used for) operating activities:
Net income	8,153			9,460			5,661			3,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	4,379			3,536			2,623			2,229
Share-based compensation	859			820			449			389
Amortization of intangibles	800			782			427			396
(Gains) losses on equity investments, net	(100		)	(401		)	134			(274		)
Changes in assets and liabilities:
Accounts receivable	490			369			(796		)	(235		)
Inventories	(1,443		)	(303		)	(548		)	(512		)
Accounts payable	431			274			117			196
Accrued compensation and benefits	(1,012		)	(884		)	(1,500		)	(1,620		)
Customer deposits and prepaid supply agreements	(444		)	1,580
Prepaid supply agreements							(87		)	(228		)
Income taxes	(15		)	(1,133		)	753			440
Other assets and liabilities	448			(403		)	(1,075		)	204
Total adjustments	4,393			4,237			497			985
Net cash provided by operating activities	12,546			13,697			6,158			4,959
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment	(6,875		)	(7,440		)	(3,268		)	(3,321		)
Purchases of available-for-sale debt investments	(1,721		)	(1,578		)	(513		)	(872		)
Maturities of available-for-sale debt investments	1,903			1,720
Maturities and sales of available-for-sale debt investments							625			948
Purchases of trading assets	(4,498		)	(6,501		)	(3,897		)	(1,869		)
Maturities and sales of trading assets	3,808			7,691			3,660			1,554
Sales of equity investments	1,331			215			20			1,077
Other investing	42			(91		)	(363		)	(239		)
Net cash used for investing activities	(6,010		)	(5,984		)	(3,736		)	(2,722		)
Cash flows provided by (used for) financing activities:
Increase (decrease) in short-term debt, net	996			1,991			—			1,682
Issuance of long-term debt, net of issuance costs	601			—			10,247			135
Repayment of debt and debt conversion	(1,033		)	(1,169		)	(1,075		)	(861		)
Proceeds from sales of common stock through employee equity incentive plans	305			320			503			290
Repurchase of common stock	(5,579		)	(5,807		)	(4,229		)	(2,530		)
Payment of dividends to stockholders	(2,828		)	(2,800		)	(1,408		)	(1,414		)
Other financing	850			(1,067		)	726			596
Net cash provided by (used for) financing activities	(6,688		)	(8,532		)	4,764			(2,102		)
Net increase (decrease) in cash and cash equivalents	(152		)	(819		)	7,186			135
Cash and cash equivalents, end of period	$	2,867		$	2,614		$	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	$	2,678		$	2,789		$	2,294		$	2,259
Cash paid during the period for:
Interest, net of capitalized interest	$	243		$	209		$	67		$	109
Income taxes, net of refunds	$	1,112		$	2,196		$	211		$	125

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Cash Flows	69

Table of Contents

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY


	Common Stock and Capital in Excess of Par Value					Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total			Common Stock and Capital in Excess of Par Value					Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
(In Millions, Except Per Share Amounts)	Shares		Amount																	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						Accumulated Other Comprehensive Income (Loss)						Total								Accumulated Other Comprehensive Income (Loss)						Total
									Retained Earnings														Retained Earnings
Balance as of March 30, 2019	4,477		$	25,346		$	(813	)	$	49,128		$	73,661
Balance as of December 29, 2019															4,290		$	25,261		$	(1,280	)	$	53,523		$	77,504
Net income	—		—			—			4,179			4,179			—		—			—			5,661			5,661
Other comprehensive income (loss)	—		—			191			—			191			—		—			(261		)	—			(261		)
Employee equity incentive plans and other	28		31			—			—			31			17		620			—			—			620
Share-based compensation	—		471			—			—			471			—		449			—			—			449
Temporary equity reduction	—		28			—			—			28			—		155			—			—			155
Convertible debt	—		(120		)	—			—			(120		)	—		(750		)	—			—			(750		)
Repurchase of common stock	(67	)	(381		)	—			(2,764		)	(3,145		)	(71	)	(420		)	—			(3,689		)	(4,109		)
Restricted stock unit withholdings	(7	)	(235		)	—			(114		)	(349		)	(2	)	(64		)	—			(32		)	(96		)
Balance as of June 29, 2019	4,430		$	25,140		$	(622	)	$	50,429		$	74,947
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 March 31, 2018	4,660		$	26,430		$	(683	)	$	44,418		$	70,165
Net income	—		—			—			5,006			5,006
Other comprehensive income (loss)	—		—			(406		)	—			(406		)
Employee equity incentive plans and other¹	31		110			—			—			110
Share-based compensation	—		372			—			—			372
Temporary equity reduction	—		147			—			—			147
Convertible debt	—		(563		)	—			—			(563		)
Non-controlling interest	—		(375		)	—			—			(375		)
Repurchase of common stock	(76	)	(424		)	—			(3,589		)	(4,013		)
Restricted stock unit withholdings	(8	)	(227		)	—			(169		)	(396		)
Balance as of June 30, 2018	4,607		$	25,470		$	(1,089	)	$	45,666		$	70,047

Six Months Ended

Balance as of December 29, 2018	4,516		$	25,365		$	(974	)	$	50,172		$	74,563
Balance as of December 28, 2018															4,516		$	25,365		$	(974	)	$	50,172		$	74,563
Net income	—		—			—			8,153			8,153			—		—			—			3,974			3,974
Other comprehensive income (loss)	—		—			352			—			352			—		—			161			—			161
Employee equity incentive plans and other	39		403			—			—			403			11		372			—			—			372
Share-based compensation	—		860			—			—			860			—		389			—			—			389
Temporary equity reduction	—		173			—			—			173			—		145			—			—			145
Convertible debt	—		(712		)	—			—			(712		)	—		(592		)	—			—			(592		)
Repurchase of common stock	(117	)	(659		)	—			(4,936		)	(5,595		)	(49	)	(278		)	—			(2,172		)	(2,450		)
Restricted stock unit withholdings	(8	)	(290		)	—			(131		)	(421		)	(1	)	(55		)	—			(17		)	(72		)
Cash dividends declared ($0.63 per share)	—		—			—			(2,829		)	(2,829		)	—		—			—			(2,829		)	(2,829		)
Balance as of June 29, 2019	4,430		$	25,140		$	(622	)	$	50,429		$	74,947

Balance as of December 30, 2017	4,687		$	26,074		$	862		$	42,083		$	69,019
Adjustment for change in accounting principle	—		—			(1,790		)	2,424			634
Opening balance as of December 31, 2017	4,687		26,074			(928		)	44,507			69,653
Net income	—		—			—			9,460			9,460
Other comprehensive income (loss)	—		—			(161		)	—			(161		)
Employee equity incentive plans and other¹	46		433			—			—			433
Share-based compensation	—		825			—			—			825
Temporary equity reduction	—		212			—			—			212
Convertible debt	—		(770		)	—			—			(770		)
Non-controlling interest	—		(375		)	—			—			(375		)
Repurchase of common stock	(117	)	(649		)	—			(5,319		)	(5,968		)
Restricted stock unit withholdings	(9	)	(280		)	—			(181		)	(461		)
Cash dividends declared ($0.60 per share)	—		—			—			(2,801		)	(2,801		)
Balance as of June 30, 2018	4,607		$	25,470		$	(1,089	)	$	45,666		$	70,047
Balance as of March 30, 2019															4,477		$	25,346		$	(813	)	$	49,128		$	73,661


¹	~~Includes approximately $375 million of non-controlling interest activity due to our acquisition of Mobileye in 2017, which was eliminated in 2018 due to the purchase of remaining shares.~~

See accompanying notes.



FINANCIAL STATEMENTS	Consolidated Condensed Statements of Stockholders' Equity	710

Table of Contents

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE 1 :	BASIS OF PRESENTATION

We prepared our interim ~~consolidated condensed financial statements~~Consolidated Condensed Financial Statements that accompany these notes in conformity with U.S. GAAP, consistent in all material respects with those applied in our ~~Annual Report on~~ Form 10-K for the fiscal year ended December 29, 2018 (2018 Form 10-K), except for changes associated with leases as detailed in "Note 2: Recent Accounting Standards and Accounting Policies." We have reclassified certain prior period amounts to conform to current period presentation.28, 2019.

We have made estimates and judgments affecting the amounts reported in our ~~consolidated condensed financial statements~~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~~Consolidated Financial Statements in our ~~2018~~2019 Form ~~10-K.~~10-K where we include additional information about our policies and the methods and assumptions used in our estimates.



~~NOTE 2 :~~	~~RECENT ACCOUNTING STANDARDS AND ACCOUNTING POLICIES~~

We assess the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on our financial statements and below describe impacts from newly adopted standards, as well as material updates to our previous assessments, if any, from our 2018 Form 10-K.

~~ACCOUNTING STANDARDS ADOPTED~~

~~Leases~~

~~Standard/Description:~~ ~~This new lease accounting standard requires that we recognize leased assets and corresponding liabilities on the balance sheet and provide enhanced disclosure of lease activity.~~

~~Effective Date and Adoption Considerations:~~ Effective in the first quarter of 2019. The standard was adopted applying the modified retrospective approach at the beginning of the period of adoption. Our leased assets and corresponding liabilities exclude non-lease components.

~~Effect on Financial Statements or Other Significant Matters:~~ Within the opening balances for the fiscal year beginning December 30, 2018, we recognized leased assets and corresponding liabilities in other long-term assets of $706 million, which includes $81 million of previously recognized prepaid land use rights, as well as corresponding accrued liabilities of $180 million and other long-term liabilities of $445 million.

~~Accounting Policy Updates and Disclosures:~~ We determine if an arrangement is a lease at inception, and classify it as finance or operating. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and not included in our leased assets and corresponding liabilities. Leases primarily consist of real property, and, to a lesser extent, certain machinery and equipment.

We recognized leased assets in other long-term assets of $684 million and corresponding accrued liabilities of $178 million, and other long-term liabilities of $426 million as of June 29, 2019. Our leases have remaining lease terms of 1 to 9 years, some of which may include options to extend the leases for up to 39 years. The weighted average remaining lease term was 5.0 years, and the weighted average discount rate was 3.6% as of June 29, 2019.

For the six months ended June 29, 2019, lease expense was $94 million. In accordance with the new leases standard, discounted and undiscounted lease payments under non-cancelable leases as of June 29, 2019, excluding non-lease components, are as follows:

(In Millions) Remainder of 2019 2020 2021 2022 2023 2024 and Thereafter Total
Lease payments $ 93
$ 173
$ 122
$ 96
$ 70
$ 107
$ 661
Present value of lease payments $ 604



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	8

~~Table of Contents~~

~~Lease expense was $231 million in 2018 ($264 million in 2017). Prior to our adoption of the new leases standard, future minimum lease payments as of December 29, 2018, which were undiscounted and included lease and non-lease components, were as follows:~~

(In Millions) 2019 2020 2021 2022 2023 2024 and Thereafter Total
Minimum rental commitments under all non-cancelable leases $ 229
$ 181
$ 133
$ 101
$ 70
$ 121
$ 835



NOTE 32 :	OPERATING SEGMENTS

We manage our business through the following operating segments:

~~Client Computing Group (CCG)~~DCG

~~Data Center Group (DCG)~~

~~Internet of Things Group (IOTG)~~IOTG

Mobileye

~~Non-Volatile Memory Solutions Group (NSG)~~NSG

~~Programmable Solutions Group (PSG)~~PSG

~~All Other~~CCG

We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package. A platform product may be enhanced by additional hardware, software, and services offered by Intel. Platform products are used in various form factors across our CCG, DCG, and IOTG operating segments. 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.

~~CCG~~DCG and ~~DCG~~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.

~~The~~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 ~~Chief Operating Decision Maker (CODM), which~~CODM, who is our ~~Chief Executive Officer (CEO),~~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	911

Table of Contents

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


	Three Months Ended						Six Months Ended						Three Months Ended
(In Millions)	Jun 29, 2019			Jun 30, 2018			Jun 29, 2019			Jun 30, 2018			Mar 28, 2020			Mar 30, 2019
Net revenue:
Client Computing Group
Platform	$	7,925		$	8,065		$	15,749		$	15,680
Adjacent	916			663			1,678			1,268
	8,841			8,728			17,427			16,948
Data Center Group
Platform	4,553			5,100			9,035			9,924			$	6,427		$	4,482
Adjacent	430			449			850			859			566			420
	4,983			5,549			9,885			10,783			6,993			4,902
Internet of Things
IOTG	986			880			1,896			1,720			883			910
Mobileye	201			173			410			324			254			209
	1,187			1,053			2,306			2,044			1,137			1,119

Non-Volatile Memory Solutions Group	940			1,079			1,855			2,119			1,338			915
Programmable Solutions Group	489			517			975			1,015			519			486
Client Computing Group
Platform													8,712			7,824
Adjacent													1,063			762
													9,775			8,586

All other	65			36			118			119			66			53
Total net revenue	$	16,505		$	16,962		$	32,566		$	33,028		$	19,828		$	16,061

Operating income (loss):
Client Computing Group	$	3,737		$	3,234		$	6,809		$	6,025
Data Center Group	1,800			2,737			3,641			5,339			$	3,492		$	1,841

Internet of Things
IOTG	294			243			545			470			243			251
Mobileye	53			44			121			54			88			68
	347			287			666			524			331			319

Non-Volatile Memory Solutions Group	(284		)	(65		)	(581		)	(146		)	(66		)	(297		)
Programmable Solutions Group	52			101			141			198			97			89
Client Computing Group													4,225			3,072
All other	(1,035		)	(1,021		)	(1,885		)	(2,197		)	(1,041		)	(850		)
Total operating income	$	4,617		$	5,273		$	8,791		$	9,743		$	7,038		$	4,174



FINANCIAL STATEMENTS	Notes to Financial Statements	1012

Table of Contents

Disaggregated net revenue for each period was as follows:


	Three Months Ended				Six Months Ended				Three Months Ended
(In Millions)	Jun 29, 2019		Jun 30, 2018		Jun 29, 2019		Jun 30, 2018		Mar 28, 2020		Mar 30, 2019
Platform revenue
Desktop platform	$	2,767	$	2,954	$	5,653	$	5,861
Notebook platform	5,136		5,086		10,063		9,775
DCG platform	4,553		5,100		9,035		9,924		$	6,427	$	4,482
IOTG platform	891		745		1,716		1,464		795		825
Other platform¹	22		25		33		44
CCG Desktop platform									2,840		2,886
CCG Notebook platform									5,857		4,926
CCG other platform¹									15		12
	13,369		13,910		26,500		27,068		15,934		13,131

Adjacent revenue²	3,136		3,052		6,066		5,960		3,894		2,930
Total revenue	$	16,505	$	16,962	$	32,566	$	33,028	$	19,828	$	16,061


¹	Includes our tablet and service provider revenue.


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

Planned ~~divestiture~~Divestiture of ~~smartphone modem business~~our Home Gateway Platform Division

~~On July 25, 2019, we~~We signed a definitive agreement on April 5, 2020 to sell the majority of ~~our smartphone modem business.~~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 ~~will continue to meet~~reclassified the assets and liabilities as held-for-sale within other current ~~customer commitments for our existing 4G smartphone modem product line.~~assets/liabilities. We expect to close the transaction ~~which will include certain employees, intellectual property, equipment and leases,~~ in the ~~fourth~~third quarter of ~~2019. We expect to record a gain on divestiture of approximately $500 million, net of tax.~~2020.



NOTE 43 :	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				Six Months Ended				Three Months Ended
(In Millions, Except Per Share Amounts)	Jun 29, 2019		Jun 30, 2018		Jun 29, 2019		Jun 30, 2018		Mar 28, 2020		Mar 30, 2019
Net income available to common stockholders	$	4,179	$	5,006	$	8,153	$	9,460	$	5,661	$	3,974
Weighted average shares of common stock outstanding – basic	4,466		4,649		4,479		4,661
Weighted average shares of common stock outstanding—basic									4,266		4,492
Dilutive effect of employee equity incentive plans	40		52		46		59		46		53
Dilutive effect of convertible debt	17		46		18		48		—		19
Weighted average shares of common stock outstanding – diluted	4,523		4,747		4,543		4,768
Earnings per share – basic	$	0.94	$	1.08	$	1.82	$	2.03
Earnings per share – diluted	$	0.92	$	1.05	$	1.79	$	1.98
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 ~~restricted stock units (RSUs),~~RSUs, and the assumed issuance of common stock under the stock purchase plan. ~~Our convertible debentures due 2039 (2009 debentures) require settlement~~

In January 2020, we fully redeemed the remaining principal of our 2009 Debentures. We included our 2009 Debentures in the ~~principal amount~~calculation of ~~the debt in cash upon conversion. Since the conversion premium is paid in cash or stock at our option, we determined the potentially dilutive shares~~diluted earnings per share of common stock in 2019 by applying the treasury stock ~~method.~~method because the average market price was above the conversion price.

~~In all periods presented, securities~~Securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per ~~share. In~~share in all periods presented, we included our 2009 debentures in the calculation of diluted earnings per share of common stock because the average market price was above the conversion price. We could potentially exclude the 2009 debentures in the future if the average market price is below the conversion price.presented.



FINANCIAL STATEMENTS	Notes to Financial Statements	1113

Table of Contents



NOTE 54 :	CONTRACT LIABILITIES


(In Millions)	Jun 29, 2019		Dec 29, 2018		Mar 28, 2020		Dec 28, 2019
Prepaid supply agreements	$	2,143	$	2,587	$	1,718	$	1,805
Other	162		122		271		236
Total contract liabilities	$	2,305	$	2,709	$	1,989	$	2,041

Contract liabilities are primarily related to ~~partial~~ prepayments received from customers on long-term prepaid supply agreements ~~towards~~toward future NSG product delivery. AsThe 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 short-term portion of prepayments from supply agreements is reported on the consolidated condensed balance sheets within other accrued liabilities.~~

The ~~following table shows the~~timing and amount of future anticipated revenues from these agreements may vary from our expectations due to changes in ~~contract liability balances relating to prepaid~~ supply, ~~agreements during the first six months of 2019:~~

(In Millions)
Prepaid supply agreements balance as of December 29, 2018 $ 2,587
Prepaids utilized (444 )
Prepaid supply agreements balance as of June 29, 2019 $ 2,143

demand, and market pricing.



NOTE 65 :	OTHER FINANCIAL STATEMENT DETAILS

INVENTORIES


(In Millions)	Jun 29, 2019		Dec 29, 2018		Mar 28, 2020		Dec 28, 2019
Raw materials	$	808	$	813	$	877	$	840
Work in process	5,612		4,511		6,654		6,225
Finished goods	2,276		1,929		1,715		1,679
Total inventories	$	8,696	$	7,253	$	9,246	$	8,744

INTEREST AND OTHER, NET

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


	Three Months Ended						Six Months Ended						Three Months Ended
(In Millions)	Jun 29, 2019			Jun 30, 2018			Jun 29, 2019			Jun 30, 2018			Mar 28, 2020			Mar 30, 2019
Interest income	$	125		$	108		$	260		$	199		$	93		$	135
Interest expense	(135		)	(116		)	(273		)	(228		)	(135		)	(138		)
Other, net	(53		)	467			(111		)	386			(271		)	(58		)
Total interest and other, net	$	(63	)	$	459		$	(124	)	$	357		$	(313	)	$	(61	)

Interest expense in the preceding table is net of ~~$120~~$83 million of interest capitalized in the ~~second quarter~~first three months of ~~2019 and $245~~2020 ($125 million in the first ~~six~~three months of ~~2019 ($126 million in the second quarter of 2018 and $239 million in the first six months of 2018)~~2019). ~~In the second quarter of 2018, we completed the divestiture of Wind River, and recognized a pre-tax gain of $494 million.~~



FINANCIAL STATEMENTS	Notes to Financial Statements	14

Table of Contents



NOTE 76 :	RESTRUCTURING AND OTHER CHARGES

A restructuring program was approved in the ~~second~~first quarter of ~~2019~~2020 to further align our workforce with our continuing investments in the business and execute the planned ~~exit~~divestiture of ~~the smartphone modem business.~~Home Gateway Platform, a division of CCG. We expect these actions to be substantially complete ~~by end~~in the third quarter of ~~2019.~~



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	12

~~Table of Contents~~

2020.

Restructuring and other charges by type for the ~~2019 Restructuring Program for the~~ period were as follows:


	Three Months Ended				Six Months Ended				Three Months Ended
(In Millions)	Jun 29, 2019		Jun 30, 2018		Jun 29, 2019		Jun 30, 2018		Mar 28, 2020
Employee severance and benefit arrangements	$	168	$	—	$	168	$	—	$	105
Asset impairment and other charges	16		—		16		—		57
Total restructuring and other charges	$	184	$	—	$	184	$	—	$	162



NOTE 87 :	INVESTMENTS

DEBT INVESTMENTS

Trading Assets

Net ~~gains~~losses related to trading assets still held at the reporting date were ~~$99 million in the second quarter of 2019 and $117~~$231 million in the first ~~six~~three months of ~~2019~~2020 ($~~326~~16 million of net ~~losses in the second quarter of 2018 and $214 million~~gains in the first ~~six~~three months of ~~2018)~~2019). Net ~~losses~~gains on the related derivatives were ~~$102 million in the second quarter of 2019 and $104~~$100 million in the first ~~six~~three months of ~~2019 (net~~2020 ($2 million of net gains ~~of $316 million in the second quarter of 2018 and $221 million~~ in the first ~~six~~three months of ~~2018)~~2019).

Available-for-Sale Debt Investments


	June 29, 2019									December 29, 2018									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		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate debt	$	3,160	$	45	$	(4	)	$	3,201	$	3,068	$	2	$	(28	)	$	3,042	$	3,656	$	46	$	(9	)	$	3,693	$	2,914	$	44	$	—		$	2,958
Financial institution instruments	3,034		18		(1		)	3,051		3,076		3		(11		)	3,068		9,482		12		(2		)	9,492		3,007		15		(1		)	3,021
Government debt	903		6		—			909		1,069		1		(9		)	1,061		748		11		(1		)	758		560		4		—			564
Total available-for-sale debt investments	$	7,097	$	69	$	(5	)	$	7,161	$	7,213	$	6	$	(48	)	$	7,171	$	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 ~~June 29, 2019~~March 28, 2020 and December ~~29, 2018.~~28, 2019.

The fair value of available-for-sale debt investments, by contractual maturity, as of ~~June 29, 2019,~~March 28, 2020, was as follows:

(In Millions) Fair Value
Due in 1 year or less $ 3,174
Due in 1–2 years 733
Due in 2–5 years 2,722
Due after 5 years 122
Instruments not due at a single maturity date 410
Total $ 7,161

~~EQUITY INVESTMENTS~~

(In Millions) Jun 29,
2019 Dec 29,
2018
Marketable equity securities $ 197
$ 1,440
Non-marketable equity securities 3,134
2,978
Equity method investments 1,298
1,624
Total $ 4,629

$ 6,042



(In Millions)	Fair Value
Due in 1 year or less	$	3,443
Due in 1–2 years	1,589
Due in 2–5 years	1,354
Due after 5 years	—
Instruments not due at a single maturity date	7,557
Total	$	13,943



FINANCIAL STATEMENTS	Notes to Financial Statements	1315

Table of Contents

EQUITY INVESTMENTS



(In Millions)	Mar 28, 2020		Dec 28, 2019
Marketable equity securities	$	330	$	450
Non-marketable equity securities	3,522		3,480
Equity method investments	28		37
Total	$	3,880	$	3,967

We recognized $143 million of impairment charges on our non-marketable portfolio in the first three months of 2020 based on our assessment of the impact of recent public and private market volatility and tightening of liquidity.

The components of gains (losses) on equity investments, net for each period were as follows:


	Three Months Ended						Six Months Ended						Three Months Ended
(In Millions)	Jun 29, 2019			Jun 30, 2018			Jun 29, 2019			Jun 30, 2018			Mar 28, 2020			Mar 30, 2019
Ongoing mark-to-market adjustments on marketable equity securities	$	(179	)	$	(235	)	$	74		$	371		$	(103	)	$	253
Observable price adjustments on non-marketable equity securities	8			24			16			148			79			8
Impairments	(39		)	(26		)	(62		)	(43		)
Impairment charges													(143		)	(23		)
Sale of equity investments and other¹	380			34			576			(36		)	56			196
Total gains (losses) on equity investments, net	$	170		$	(203	)	$	604		$	440		$	(111	)	$	434

¹ Sale of equity investments and other includes realized gains (losses) on sales of non-marketable equity investments, our share of equity method investee gains (losses) and distributions, and initial fair value adjustments recorded upon a security becoming marketable.

Gains and losses for our marketable and non-marketable equity securities during the period were as follows:


	Three Months Ended						Six Months Ended						Three Months Ended
(In Millions)	Jun 29, 2019			Jun 30, 2018			Jun 29, 2019			Jun 30, 2018			Mar 28, 2020			Mar 30, 2019
Net gains (losses) recognized during the period on equity securities	$	(178	)	$	(133	)	$	84		$	592		$	(140	)	$	263
Less: Net (gains) losses recognized during the period on equity securities sold during the period	(33		)	(11		)	(258		)	(49		)	(7		)	(190		)
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(211	)	$	(144	)	$	(174	)	$	543		$	(147	)	$	73

~~IM Flash Technologies, LLC~~IMFT

~~IM Flash Technologies, LLC (IMFT)~~IMFT was formed in 2006 by Micron Technology, Inc. (Micron) and Intel to jointly develop NAND flash memory and 3D XPoint™ technology products. ~~IMFT is an unconsolidated variable interest entity and all costs of IMFT are passed on to Micron and Intel through sale of products or services in proportional share of ownership.~~ As of ~~June 29,~~March 30, 2019, we ~~own~~had a carrying value of $1.5 billion in IMFT and owned a 49% interest in ~~IMFT. Our portion of IMFT costs was approximately $224 million in~~ the ~~second quarter of 2019 and approximately $356 million in the first six months of 2019 (approximately $144 million in the second quarter of 2018 and $227 million in the first six months of 2018).~~

IMFT depends on Micron and Intel for any additional cash needs to be provided in the form of cash calls or member debt financing (MDF). Extensions of MDF may be converted to a capital contribution at the lender's request, or may be repaid upon availability of funds. During the first six months of 2019, IMFT repaid $316 million of MDF to Intel. The carrying balance of our equity method investment in IMFT as of June 29, 2019 is $1.3 billion.

~~In January 2019, Micron exercised its right to call our~~unconsolidated variable interest ~~in IMFT. The sale of~~entity. We sold our non-controlling interest in IMFT to Micron ~~is expected to close on~~in October ~~31,~~ 2019. We will continue to purchase product manufactured by Micron at the IMFT facility ~~for a period~~under supply agreements, which include the next generation of ~~up to one year following the close date.~~

~~ASML Holding N.V.~~

~~As of December 29, 2018, Intel owned $1.1 billion in ASML Holding N.V. (ASML). We have fully sold our equity investment in ASML.~~3DXpoint technology.



NOTE 98 :	BORROWINGS

~~During the first six months~~As of ~~2019, we received proceeds of $601 million in aggregate from the sale of bonds issued by the Industrial Development Authority~~March 28, 2020, our short-term debt was $3.5 billion, primarily comprised of the ~~City~~current portion of ~~Chandler, Arizona (the Arizona bonds) and the State~~our long-term debt ($3.7 billion as of ~~Oregon Business Development Commission (the Oregon bonds)~~December 28, 2019). ~~The bonds are~~

We have an ongoing authorization from our ~~unsecured general obligations in accordance with loan agreements we entered into with the Industrial Development Authority~~Board of ~~the City of Chandler, Arizona and the State of Oregon Business Development Commission. The bonds mature in 2049 and carry an interest rate of 5.0%. The Arizona bonds and the Oregon bonds are subject~~Directors to mandatory tender in June 2024 and March 2022, respectively, at which time we can re-market the bonds as either fixed-rate bonds for a specified period or as variable-rate bonds until another fixed-rate period is selected or until their final maturity date.borrow up to $10.0 billion under our commercial paper program.



FINANCIAL STATEMENTS	Notes to Financial Statements	1416

Table of Contents

LONG-TERM DEBT



	Mar 28, 2020					Dec 28, 2019
(In Millions)	Effective Interest Rate		Amount			Amount
Floating-rate senior notes:
Three-month LIBOR plus 0.08%, due May 2020	1.93	%	$	700		$	700
Three-month LIBOR plus 0.35%, due May 2022	2.19	%	800			800
Fixed-rate senior notes:
1.85%, due May 2020	1.88	%	1,000			1,000
2.45%, due July 2020	2.47	%	1,750			1,750
1.70%, due May 2021	1.77	%	500			500
3.30%, due October 2021	2.96	%	2,000			2,000
2.35%, due May 2022	1.95	%	750			750
3.10%, due July 2022	2.68	%	1,000			1,000
4.00%, due December 2022¹	3.61	%	325			382
2.70%, due December 2022	2.27	%	1,500			1,500
4.10%, due November 2023	3.20	%	400			400
2.88%, due May 2024	2.30	%	1,250			1,250
2.70%, due June 2024	2.12	%	600			600
3.40%, due March 2025	3.46	%	1,500			—
3.70%, due July 2025	3.81	%	2,250			2,250
2.60%, due May 2026	2.28	%	1,000			1,000
3.75%, due March 2027	3.80	%	1,000			—
3.15%, due May 2027	2.84	%	1,000			1,000
2.45%, due November 2029	2.45	%	2,000			1,250
3.90%, due March 2030	3.94	%	1,500			—
4.00%, due December 2032	2.82	%	750			750
4.60%, due March 2040	4.63	%	750			—
4.80%, due October 2041	3.75	%	802			802
4.25%, due December 2042	3.00	%	567			567
4.90%, due July 2045	3.78	%	772			772
4.10%, due May 2046	3.04	%	1,250			1,250
4.10%, due May 2047	3.00	%	1,000			1,000
4.10%, due August 2047	2.58	%	640			640
3.73%, due December 2047	3.30	%	1,967			1,967
3.25%, due November 2049	3.22	%	2,000			1,500
4.75%, due March 2050	4.77	%	2,250			—
3.10%, due February 2060	3.12	%	1,000			—
4.95%, due March 2060	5.02	%	1,000			—
Oregon and Arizona bonds:
2.40%-2.70%, due December 2035 - 2040	2.49	%	423			423
5.00%, due March 2049	2.11	%	138			138
5.00%, due June 2049	2.13	%	438			438
Junior Subordinated Convertible Debentures:
3.25%, due August 2039	—		—			372
Total Senior Notes and Other Borrowings			38,572			28,751
Unamortized Premium/Discount and Issuance Costs			(379		)	(529		)
Hedge Accounting Fair Value Adjustments			1,726			781
Long-term debt			39,919			29,003
Current portion of long-term debt			(3,464		)	(3,695		)
Total long-term debt			$	36,455		$	25,308


¹	To manage foreign currency risk associated with the Australian-dollar-denominated notes issued in 2015, we entered into currency interest rate swaps with an aggregate notional amount of $396 million, which effectively converted these notes to U.S.-dollar-denominated notes. For further discussion on our currency interest rate swaps, see "Note 11: Derivative Financial Instruments."



FINANCIAL STATEMENTS	Notes to Financial Statements	17

Table of Contents

In November 2019, we issued a notice of redemption for the remaining $372 million of 2009 Debentures with a redemption date of January 9, 2020. During the fourth quarter of 2019, the closing stock price conversion right condition of the 2009 Debentures continued to be met and therefore the debentures were convertible at the option of the holders until January 6, 2020. All 2009 Debentures were either converted prior to January 6, 2020 or redeemed on the redemption date.

In the first three months of 2020, we issued a total of $10.3 billion aggregate principal amount of senior notes. We intend to use the net proceeds from the offering for general corporate purposes, which may include refinancing outstanding debt, funding for working capital and capital expenditures, and repurchasing shares of our common stock.

Our senior floating rate notes pay interest quarterly and our senior fixed rate notes pay interest semiannually. We may redeem the fixed rate notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The obligations under the notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and effectively rank junior to all liabilities of our subsidiaries.



FINANCIAL STATEMENTS	Notes to Financial Statements	18

Table of Contents



NOTE 109 :	FAIR VALUE

For information about our fair value policies, and methods and assumptions used in estimating the fair value of our financial assets and liabilities, see "Note 2: Accounting Policies" and "Note 16: Fair Value" in our 2018 Form 10-K.

ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS


	June 29, 2019								December 29, 2018								March 28, 2020								December 28, 2019
	Fair Value Measured and Recorded at Reporting Date Using								Fair Value Measured and Recorded at Reporting Date Using								Fair Value Measured and Recorded at Reporting Date Using								Fair Value Measured and Recorded at Reporting Date Using
(In Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Corporate debt	$	—	$	417	$	—	$	417	$	—	$	262	$	—	$	262	$	—	$	1,348	$	—	$	1,348	$	—	$	713	$	—	$	713
Financial institution instruments¹	410		343		—		753		550		183		—		733		7,557		600		—		8,157		1,064		408		—		1,472
Government debt²																	—		199		—		199		—		—		—		—
Reverse repurchase agreements	—		1,300		—		1,300		—		1,850		—		1,850		—		1,150		—		1,150		—		1,500		—		1,500
Short-term investments:
Corporate debt	—		810		—		810		—		937		—		937		—		493		—		493		—		347		—		347
Financial institution instruments¹	—		1,324		—		1,324		—		1,423		—		1,423		—		803		—		803		—		724		—		724
Government debt²	—		280		—		280		—		428		—		428		—		—		—		—		—		11		—		11
Trading assets:
Corporate debt	—		2,755		—		2,755		—		2,635		—		2,635		—		2,850		—		2,850		—		2,848		—		2,848
Financial institution instruments¹	54		1,470		—		1,524		67		1,273		—		1,340		78		2,020		—		2,098		87		1,578		—		1,665
Government debt²	—		2,384		—		2,384		—		1,868		—		1,868		—		3,179		—		3,179		—		3,334		—		3,334
Other current assets:
Derivative assets	29		225		—		254		—		180		—		180		5		372		—		377		50		230		—		280
Loans receivable³	—		57		—		57		—		354		—		354		—		339		—		339		—		—		—		—
Marketable equity securities	197		—		—		197		1,440		—		—		1,440		330		—		—		330		450		—		—		450
Other long-term investments:
Corporate debt	—		1,974		—		1,974		—		1,843		—		1,843		—		1,852		—		1,852		—		1,898		—		1,898
Financial institution instruments¹	—		974		—		974		—		912		—		912		—		532		—		532		—		825		—		825
Government debt²	—		629		—		629		—		633		—		633		—		559		—		559		—		553		—		553
Other long-term assets:
Derivative assets	—		689		—		689		—		100		—		100		—		1,604		35		1,639		—		690		16		706
Loans receivable³	—		507		—		507		—		229		—		229		—		203		—		203		—		554		—		554
Total assets measured and recorded at fair value	690		16,138		—		16,828		2,057		15,110		—		17,167		$	7,970	$	18,103	$	35	$	26,108	$	1,651	$	16,213	$	16	$	17,880
Liabilities
Other accrued liabilities:
Derivative liabilities	—		303		—		303		—		412		—		412		$	190	$	614	$	—	$	804	$	3	$	287	$	—	$	290
Other long-term liabilities:
Derivative liabilities	—		15		18		33		—		415		68		483		—		106		—		106		—		13		—		13
Total liabilities measured and recorded at fair value	$	—	$	318	$	18	$	336	$	—	$	827	$	68	$	895	$	190	$	720	$	—	$	910	$	3	$	300	$	—	$	303


¹	Level 1 investments consist of money market funds. Level 2 investments consist primarily of commercial paper, certificates of deposit, time deposits, and notes and bonds issued by financial institutions.


²	Level 2 investments consist primarily of U.S. agency notes and non-U.S. government debt.


³	The fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency.



FINANCIAL STATEMENTS	Notes to Financial Statements	1519

Table of Contents

ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS

Our non-marketable equity securities, equity method investments, and certain non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment or observable price adjustment is recognized in the current period. If an observable price adjustment or impairment is recognized on our non-marketable equity securities during the period, we classify these assets as Level 3 within the fair value hierarchy based on the nature of the fair value inputs.

FINANCIAL INSTRUMENTS NOT RECORDED AT FAIR VALUE ON A RECURRING BASIS

Financial instruments not recorded at fair value on a recurring basis include non-marketable equity securities ~~(that~~and equity method investments that have not been ~~re-measured~~remeasured or impaired in the current ~~period), equity method investments,~~period, grants receivable, loans receivable, reverse repurchase agreements, and ~~our short-term and long-term~~issued debt.

As of ~~June 29, 2019,~~March 28, 2020, the aggregate carrying value of grants receivable, loans receivable, and reverse repurchase agreements was ~~$1.1 billion (the aggregate carrying amount~~$534 million ($543 million as of December ~~29, 2018 was $833 million)~~28, 2019). The estimated fair value of these financial instruments approximates their carrying value and is categorized as Level 2 within the fair value hierarchy based on the nature of the fair value inputs.

As of ~~June 29, 2019,~~March 28, 2020, the fair value of ~~short and long-term~~our issued debt ~~(excluding drafts payable)~~ was $~~30.0~~41.3 billion (~~the fair value~~$30.6 billion as of December ~~29, 2018 was $27.1 billion)~~28, 2019). These liabilities are classified as Level 2 within the fair value hierarchy based on the nature of the fair value inputs.



NOTE 10 :	OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component and related tax effects in the first three months of 2020 were as follows:



(In Millions)	Unrealized Holding Gains (Losses) on Derivatives			Actuarial Valuation and Other Pension Expenses			Translation Adjustments and Other			Total
Balance as of December 29, 2019	$	54		$	(1,382	)	$	48		$	(1,280	)
Other comprehensive income (loss) before reclassifications	(373		)	3			(6		)	(376		)
Amounts reclassified out of accumulated other comprehensive income (loss)	68			14			—			82
Tax effects	37			(5		)	1			33
Other comprehensive income (loss)	(268		)	12			(5		)	(261		)
Balance as of March 28, 2020	$	(214	)	$	(1,370	)	$	43		$	(1,541	)

We estimate that we will reclassify approximately $135 million (before taxes) of net derivative losses included in accumulated other comprehensive income (loss) into earnings within the next 12 months.



FINANCIAL STATEMENTS	Notes to Financial Statements	20

Table of Contents



NOTE 11 :	DERIVATIVE FINANCIAL INSTRUMENTS

~~For further information on our derivative policies, see "Note 2: Accounting Policies" in our 2018 Form 10-K.~~

VOLUME OF DERIVATIVE ACTIVITY

Total gross notional amounts for outstanding derivatives (recorded at fair value) at the end of each period were as follows:


(In Millions)	Jun 29, 2019		Dec 29, 2018		Mar 28, 2020		Dec 28, 2019
Foreign currency contracts	$	23,293	$	19,223	$	27,039	$	23,981
Interest rate contracts	22,292		22,447		13,859		14,302
Other	1,633		1,356		1,726		1,753
Total	$	47,218	$	43,026	$	42,624	$	40,036

FAIR VALUE OF DERIVATIVE INSTRUMENTS


	June 29, 2019				December 29, 2018				March 28, 2020				December 28, 2019
(In Millions)	Assets¹		Liabilities²		Assets¹		Liabilities²		Assets¹		Liabilities²		Assets¹		Liabilities²
Derivatives designated as hedging instruments:
Foreign currency contracts³	$	106	$	90	$	44	$	244	$	10	$	465	$	56	$	159
Interest rate contracts	669		20		84		474		1,635		—		690		9
Total derivatives designated as hedging instruments	775		110		128		718		1,645		465		746		168
Derivatives not designated as hedging instruments:
Foreign currency contracts³	134		170		132		155		362		135		179		78
Interest rate contracts	5		52		20		22		4		120		11		54
Equity Contracts	29		4		—		—
Equity contracts									5		190		50		3
Total derivatives not designated as hedging instruments	168		226		152		177		371		445		240		135
Total derivatives	$	943	$	336	$	280	$	895	$	2,016	$	910	$	986	$	303


¹	Derivative assets are recorded as other assets, current and non-current.


²	Derivative liabilities are recorded as other liabilities, current and non-current.


³	The majority of these instruments mature within 12 months.



FINANCIAL STATEMENTS	Notes to Financial Statements	1621

Table of Contents

AMOUNTS OFFSET IN THE CONSOLIDATED CONDENSED BALANCE SHEETS

The gross amounts of our derivative instruments and reverse repurchase agreements subject to master netting arrangements with various counterparties, and cash and non-cash collateral posted under such agreements at the end of each period were as follows:


	June 29, 2019														March 28, 2020
							Gross Amounts Not Offset in the Balance Sheet														Gross Amounts Not Offset in the Balance Sheet
(In Millions)	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments			Cash and Non-Cash Collateral Received or Pledged			Net Amount		Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments			Cash and Non-Cash Collateral Received or Pledged			Net Amount
Assets:
Derivative assets subject to master netting arrangements	$	937	$	—	$	937	$	(258	)	$	(679	)	$	—	$	2,005	$	—	$	2,005	$	(457	)	$	(1,513	)	$	35
Reverse repurchase agreements	1,650		—		1,650		—			(1,650		)	—		1,500		—		1,500		—			(1,418		)	82
Total assets	2,587		—		2,587		(258		)	(2,329		)	—		$	3,505	$	—	$	3,505	$	(457	)	$	(2,931	)	$	117
Liabilities:
Derivative liabilities subject to master netting arrangements	325		—		325		(258		)	(62		)	5		$	865	$	—	$	865	$	(457	)	$	(221	)	$	187
Total liabilities	$	325	$	—	$	325	$	(258	)	$	(62	)	$	5	$	865	$	—	$	865	$	(457	)	$	(221	)	$	187


	December 29, 2018														December 28, 2019
							Gross Amounts Not Offset in the Balance Sheet														Gross Amounts Not Offset in the Balance Sheet
(In Millions)	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments			Cash and Non-Cash Collateral Received or Pledged			Net Amount		Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments			Cash and Non-Cash Collateral Received or Pledged			Net Amount
Assets:
Derivative assets subject to master netting arrangements	$	292	$	—	$	292	$	(220	)	$	(72	)	$	—	$	974	$	—	$	974	$	(144	)	$	(808	)	$	22
Reverse repurchase agreements	2,099		—		2,099		—			(1,999		)	100		1,850		—		1,850		—			(1,850		)	—
Total assets	2,391		—		2,391		(220		)	(2,071		)	100		$	2,824	$	—	$	2,824	$	(144	)	$	(2,658	)	$	22
Liabilities:
Derivative liabilities subject to master netting arrangements	890		—		890		(220		)	(576		)	94		$	262	$	—	$	262	$	(144	)	$	(72	)	$	46
Total liabilities	$	890	$	—	$	890	$	(220	)	$	(576	)	$	94	$	262	$	—	$	262	$	(144	)	$	(72	)	$	46

We obtain and secure available collateral from counterparties against obligations, including securities lending transactions and reverse repurchase agreements, when we deem it appropriate.

DERIVATIVES IN CASH FLOW HEDGING RELATIONSHIPS

The before-tax net gains or losses attributed to ~~the effective portion of~~ cash flow hedges, recognized in other comprehensive income (loss), were ~~$122~~$373 million net ~~gains~~losses in the ~~second quarter~~first three months of ~~2019 and $151~~2020 ($29 million net gains in the first ~~six~~three months of ~~2019 ($339 million net losses in the second quarter of 2018 and $134 million net losses in the first six months of 2018)~~2019). Substantially all of our cash flow hedges were foreign currency contracts for all periods presented.

During the first ~~six~~three months of ~~2019~~2020 and ~~2018,~~2019, the amounts excluded from effectiveness testing were insignificant.



FINANCIAL STATEMENTS	Notes to Financial Statements	1722

Table of Contents

DERIVATIVES IN FAIR VALUE HEDGING RELATIONSHIPS

The effects of derivative instruments designated as fair value hedges, recognized in interest and other, net for each period were as follows:


	Three Months Ended						Six Months Ended						Gains (Losses) Recognized in Consolidated Condensed Statements of Income on Derivatives
(In Millions)	Jun 29, 2019			Jun 30, 2018			Jun 29, 2019			Jun 30, 2018
Three Months Ended (In Millions)													Mar 28, 2020			Mar 30, 2019
Interest rate contracts	$	554		$	(113	)	$	1,039		$	(371	)	$	954		$	485
Hedged items	(554		)	113			(1,039		)	371			(954		)	(485		)
Total	$	—		$	—		$	—		$	—		$	—		$	—

The amounts recorded on the ~~consolidated condensed balance sheets~~Consolidated Condensed Balance Sheets related to cumulative basis adjustments for fair value hedges for each period were as follows:


Line Item in the Consolidated Condensed Balance Sheet in Which the Hedged Item is Included	Carrying Amount of the Hedged Item Asset/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount Assets/(Liabilities)					Carrying Amount of the Hedged Item Asset/(Liabilities)						Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount Assets/(Liabilities)
Years Ended (In Millions)	Jun 29, 2019			Dec 29, 2018			Jun 29, 2019			Dec 29, 2018
(In Millions)												Mar 28, 2020			Dec 28, 2019			Mar 28, 2020			Dec 28, 2019
Long-term debt	$	(20,661	)	$	(19,622	)	$	(649	)	$	390	$	(13,632	)	$	(12,678	)	$	(1,635	)	$	(681	)

~~As of June 29, 2019 and December 29, 2018, the~~The total notional amount of pay ~~variable/~~variable and receive ~~fixed-interest~~fixed interest rate swaps was ~~$20.0 billion.~~$12.0 billion as of March 28, 2020 and as of December 28, 2019.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

The effects of derivative instruments not designated as hedging instruments on the ~~consolidated condensed statements~~Consolidated Condensed Statements of ~~income~~Income for each period were as follows:


		Three Months Ended					Six Months Ended							Three Months Ended
(In Millions)	Location of Gains (Losses) Recognized in Income on Derivatives	Jun 29, 2019			Jun 30, 2018		Jun 29, 2019			Jun 30, 2018			Location of Gains (Losses) Recognized in Income on Derivatives	Mar 28, 2020			Mar 30, 2019
Foreign currency contracts	Interest and other, net	$	(20	)	$	438	$	37		$	268		Interest and other, net	$	154		$	57
Interest rate contracts	Interest and other, net	(25		)	6		(39		)	20			Interest and other, net	(77		)	(14		)
Other	Various	35			27		181			(4		)	Various	(268		)	146
Total		$	(10	)	$	471	$	179		$	284			$	(191	)	$	189



NOTE 12 :	CONTINGENCIES

LEGAL PROCEEDINGS

We are a party to various legal proceedings, including those noted in this section. Although management at present believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial monetary damages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices, or requiring other remedies. An unfavorable outcome may result in a material adverse impact on our business, results of operations, financial position, and overall trends. We might also conclude that settling one or more such matters is in the best interests of our stockholders, employees, and customers, and any such settlement could include substantial payments. Except as specifically described below, we have not concluded that settlement of any of the legal proceedings noted in this section is appropriate at this time.



FINANCIAL STATEMENTS	Notes to Financial Statements	1823

Table of Contents

European Commission Competition Matter

In 2001, the ~~European Commission (EC)~~EC commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMD) that we used unfair business practices to persuade customers to buy our microprocessors. We received numerous requests for information and documents from the EC and we responded to each of those requests. The EC issued a Statement of Objections in July 2007 and held a hearing on that Statement in March 2008. The EC issued a Supplemental Statement of Objections in July 2008. In May 2009, the EC issued a decision finding that we had violated Article 82 of the EC Treaty and Article 54 of the European Economic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new treaty) by offering alleged "conditional rebates and payments" that required our customers to purchase all or most of their x86 microprocessors from us. The EC also found that we violated Article 82 by making alleged "payments to prevent sales of specific rival products." The EC imposed a fine in the amount of €1.1 billion ($1.4 billion as of May 2009), which we subsequently paid during the third quarter of 2009, and ordered us to "immediately bring to an end the infringement referred to in" the EC decision.

The EC decision contained no specific direction on whether or how we should modify our business practices. Instead, the decision stated that we should "cease and desist" from further conduct that, in the EC's opinion, would violate applicable law. We took steps, which are subject to the EC's ongoing review, to comply with that decision pending appeal. We had discussions with the EC to better understand the decision and to explain changes to our business practices.

We appealed the EC decision to the Court of First Instance (which has been renamed the General Court) in July 2009. The hearing of our appeal took place in July 2012. In June 2014, the General Court rejected our appeal in its entirety. In August 2014, we filed an appeal with the European Court of Justice. In November 2014, Intervener Association for Competitive Technologies filed comments in support of Intel’s grounds of appeal. The EC and interveners filed briefs in November 2014, we filed a reply in February 2015, and the EC filed a rejoinder in April 2015. The Court of Justice held oral argument in June 2016. In October 2016, Advocate General Wahl, an advisor to the Court of Justice, issued a non-binding advisory opinion that favored Intel on a number of grounds. The Court of Justice issued its decision in September 2017, setting aside the judgment of the General Court and sending the case back to the General Court to examine whether the rebates at issue were capable of restricting competition. The General Court has appointed a panel of five judges to consider our appeal of the EC’s 2009 decision in light of the Court of Justice’s clarifications of the law. In November 2017, the parties filed initial “Observations” about the Court of Justice’s decision and the appeal and were invited by the General Court to offer supplemental comments to each other’s “Observations,” which the parties submitted in March 2018. Responses to other questions posed by the General Court were filed in May and June 2018. ~~We are now awaiting notice as to whether the~~The General Court ~~will hold a management conference before it conducts~~heard oral argument ~~at some future date.~~in March 2020. Pending the final decision in this matter, the fine paid by Intel has been placed by the EC in commercial bank accounts where it accrues interest.

~~McAfee, Inc. Shareholder Litigation~~

On August 19, 2010, we announced that we had agreed to acquire all of the common stock of McAfee, Inc. (McAfee) for $48.00 per share. Four McAfee shareholders filed putative class-action lawsuits in Santa Clara County, California Superior Court challenging the proposed transaction. The cases were ordered consolidated in September 2010. Plaintiffs filed an amended complaint that named former McAfee board members, McAfee, and Intel as defendants, and alleged that the McAfee board members breached their fiduciary duties and that McAfee and Intel aided and abetted those breaches of duty. The complaint requested rescission of the merger agreement, such other equitable relief as the court may deem proper, and an award of damages in an unspecified amount. In June 2012, the plaintiffs’ damages expert asserted that the value of a McAfee share for the purposes of assessing damages should be $62.08.

In January 2012, the court certified the action as a class action, appointed the Central Pension Laborers’ Fund to act as the class representative, and scheduled trial to begin in January 2013. In March 2012, defendants filed a petition with the California Court of Appeal for a writ of mandate to reverse the class certification order; the petition was denied in June 2012. In March 2012, at defendants’ request, the court held that plaintiffs were not entitled to a jury trial and ordered a bench trial. In April 2012, plaintiffs filed a petition with the California Court of Appeal for a writ of mandate to reverse that order, which the court of appeal denied in July 2012. In August 2012, defendants filed a motion for summary judgment. The trial court granted that motion in November 2012, and entered final judgment in the case in February 2013. In April 2013, plaintiffs appealed the final judgment. The California Court of Appeal heard oral argument in October 2017, and in November 2017, affirmed the judgment as to McAfee's nine outside directors, reversed the judgment as to former McAfee director and chief executive officer David DeWalt, Intel, and McAfee, and affirmed the trial court's ruling that the plaintiffs are not entitled to a jury trial. At a June 2018 case management conference following remand, the Superior Court set an October hearing date for any additional summary judgment motions that may be filed, and set trial to begin in December 2018. In July 2018, plaintiffs filed a motion for leave to amend the complaint, which the court denied in September 2018. Also in July 2018, McAfee and Intel filed a motion for summary judgment on the aiding and abetting claims asserted against them; in October 2018, the court granted the motion as to McAfee and denied the motion as to Intel.

The parties agreed in principle to settle the case in late October 2018, and finalized the settlement agreement in March 2019. The settlement agreement calls for an aggregate payment by defendants of $12 million. Intel’s contribution to the settlement will be immaterial to its financial statements. In May 2019, the court granted plaintiffs’ motion for preliminary approval of the settlement and scheduled a final approval hearing for October 2019.



~~FINANCIAL STATEMENTS~~	~~Notes to Financial Statements~~	19

~~Table of Contents~~

Litigation Related to Security Vulnerabilities

In June 2017, a Google research team notified us and other companies that it had identified security vulnerabilities (now commonly referred to as “Spectre” and “Meltdown”) that affect many types of microprocessors, including our products. As is standard when findings like these are presented, we worked together with other companies in the industry to verify the research and develop and validate software and firmware updates for impacted technologies. On January 3, 2018, information on the security vulnerabilities was publicly reported, before software and firmware updates to address the vulnerabilities were made widely available. Numerous lawsuits relating to the Spectre and Meltdown security vulnerabilities, as well as another variant of these vulnerabilities (“Foreshadow”) that has since been identified, have been filed against Intel and, in certain cases, our current and former executives and directors, in U.S. federal and state courts and in certain courts in other ~~countries relating to the Spectre and Meltdown security vulnerabilities, as well as another variant of these vulnerabilities (“Foreshadow”) that has since been identified.~~countries.

As of ~~July 24, 2019, 48~~April 22, 2020, consumer class action lawsuits relating to certain security vulnerabilities publicly disclosed in 2018 were pending in the U.S., Canada, and ~~three securities class action lawsuits have been filed.~~Israel. The ~~securities class actions, which were consolidated, were dismissed with prejudice in April 2019. The consumer class action~~ plaintiffs, who purport to represent various classes of ~~end users~~purchasers of our products, generally claim to have been harmed by Intel's actions and/or omissions in connection with the security vulnerabilities and assert a variety of common law and statutory claims seeking monetary damages and equitable relief. OfIn the ~~consumer~~U.S., numerous individual class action ~~lawsuits, 44 have been~~suits filed in ~~the U.S., two of which have been dismissed; two have been filed~~various jurisdictions were consolidated in ~~Canada; and two have been filed in Israel. In~~ April 2018 ~~the U.S. Judicial Panel on Multidistrict Litigation ordered the U.S. consumer class action lawsuits consolidated~~ for all pretrial proceedings in the U.S. District Court for the District of Oregon. ~~Intel filed a~~In March 2020, the court granted Intel's motion to dismiss the complaint in that consolidated action, but granted plaintiffs leave to file an amended complaint. In Canada, in ~~October 2018, and a hearing on that motion was held in February 2019. In the~~one case pending in the Superior Court of Justice of Ontario, an initial status conference has not yet been scheduled. In ~~the~~a second case pending in the Superior Court of Justice of Quebec, the court ~~entered an order in October 2018, staying that~~has stayed the case ~~for one year.~~until April 2020. In Israel, both consumer class action lawsuits were filed in the District Court of Haifa. In the first case, the District Court denied the parties' joint motion to stay filed in January 2019, but to date has deferred ~~Intel’s~~Intel's deadline to respond to the complaint in view of ~~Intel’s~~Intel's pending motion to dismiss in the consolidated ~~class action~~proceeding in the U.S. Intel filed a motion to stay the second case pending resolution of the consolidated ~~class action~~proceeding in the U.S., and a hearing on that motion has been ~~rescheduled~~scheduled for September 2019. In the securities class action litigation, the lead securities class action plaintiffs, who purported to represent classes of acquirers of Intel stock between October 27, 2017 and January 9, 2018, generally alleged that Intel and certain officers violated securities laws by making statements about Intel's products that were revealed to be false or misleading by the disclosure of the security vulnerabilities. The securities class actions were consolidated and were pending in the U.S. District Court for the Northern District of California. Defendants filed a motion to dismiss those actions in August 2018, which the court granted in March 2019. The court's order granted plaintiffs leave to amend their complaint, but the case was dismissed with prejudice in April 2019 after plaintiffs elected not to re-plead. Plaintiffs did not appeal.May 2020. Additional lawsuits and claims may be asserted ~~on behalf of customers and shareholders~~ seeking monetary damages or other related relief. We dispute the pending claims described above and intend to defend those lawsuits vigorously. Given the procedural posture and the nature of those cases, including that the pending proceedings are in the early stages, that alleged damages have not been specified, that uncertainty exists as to the likelihood of a class or classes being certified or the ultimate size of any class or classes if certified, and that there are significant factual and legal issues to be resolved, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, that might arise from those matters.



FINANCIAL STATEMENTS	Notes to Financial Statements	24

Table of Contents

In addition to these lawsuits, Intel stockholders ~~have~~ filed ~~seven~~multiple shareholder derivative lawsuits since January 2018 against certain current and former members of our Board of Directors and certain current and former officers, alleging that the defendants breached their duties to Intel in connection with the disclosure of the security vulnerabilities and the failure to take action in relation to alleged insider trading. The complaints ~~seek~~sought to recover damages from the defendants on behalf of Intel. ~~Three~~Some of the derivative actions were filed in the U.S. District Court for the Northern District of California and were consolidated, and the ~~other four~~others were filed in the Superior Court of the State of California in San Mateo County and were consolidated. ~~In August 2018, the~~The federal court granted defendants' motion to dismiss the consolidated complaint in the federal action in August 2018 on the ground that plaintiffs failed to plead facts sufficient to show they were excused from making a pre-lawsuit demand on the Board. The federal court granted plaintiffs leave to amend their complaint, but ~~in September 2018, plaintiffs instead requested that~~subsequently dismissed the ~~action be dismissed. The federal court ordered the case dismissed~~cases without prejudice in January ~~2019.~~2019 at plaintiffs' request. In August 2018, the California Superior Court granted defendants' motion to dismiss the consolidated complaint in the state court action on the ground that plaintiffs failed to plead facts sufficient to show they were excused from making a pre-lawsuit demand on the ~~Board. Plaintiffs filed an~~Board, but granted plaintiffs leave to amend. The court subsequently granted defendants' motion to dismiss plaintiffs' first, second, and third amended ~~complaint in April 2019, which defendants moved to dismiss~~complaints, on the same ~~grounds. A hearing on~~ground, and in March 2020 granted defendants' motion to dismiss plaintiffs' third amended complaint without granting plaintiffs leave to amend. Plaintiffs filed a motion for reconsideration of the ~~motion~~court's final order of dismissal, which is scheduled for ~~July 2019.~~hearing in June 2020.

Institute of Microelectronics, Chinese Academy of Sciences v. Intel China, Ltd., et al.

In February 2018, the Institute of Microelectronics of the Chinese Academy of Sciences (IMECAS) sued Intel China, Ltd., Dell China, Ltd. (Dell) and Beijing JingDong Century Information Technology, Ltd. (JD) for patent infringement in the Beijing High Court. IMECAS alleges that Intel’s Core series processors infringe Chinese patent CN 102956457 (’457 Patent). The complaint demands an injunction and damages of at least RMB 200,000,000 plus the cost of litigation. A trial date is not yet set. In March 2018, Dell tendered indemnity to Intel, which Intel granted in April 2018. JD also tendered indemnity to Intel, which Intel granted in October 2018. In March 2018, Intel filed an invalidation request on the ‘457 patent with the Chinese Patent Reexamination Board (PRB). The PRB held an oral hearing in September 2018 and in February 2019 upheld the validity of the challenged claims. In January 2020, Intel filed a second invalidation request on the ‘457 patent with the PRB. In September 2018 and March 2019, Intel filed petitions with the United States Patent & Trademark Office (USPTO) requesting institution of inter partes review (IPR) of U.S. Patent No. 9,070,719, the U.S. counterpart to the ‘457 patent. The USPTO denied institution of Intel’s petitions in March and October 2019, respectively. In April 2019, Intel filed a request for rehearing and a petition for Precedential Opinion Panel (POP) in the USPTO to challenge the denial of its first IPR petition, and in November 2019 Intel filed a request for rehearing on the second IPR petition. In January 2020, the USPTO denied the rehearing and petition on the first IPR petition.

In October 2019, IMECAS filed second and third lawsuits, in the Beijing IP Court, alleging infringement of Chinese Patent No. CN 102386226 (‘226 Patent) based on the manufacturing and sale of Intel’s Core i3 microprocessors. Defendants in the second case are Lenovo (Beijing) Co., Ltd. (Lenovo) and Beijing Jiayun Huitong Technology Development Co. Ltd. (BJHT). Defendants in the third case are Intel Corp., Intel China Co., Ltd., the Intel China Beijing Branch, Beijing Digital China Co., Ltd. (Digital China), and JD. Both complaints demand injunctions plus litigation costs and reserve the right to claim damages in unspecified amounts. No proceedings have occurred or are yet scheduled in these lawsuits. In December 2019, Lenovo tendered indemnity to Intel, which Intel granted in March 2020. Given the procedural posture and the nature of these cases, the unspecified nature and extent of damages claimed by IMECAS, and uncertainty regarding the availability of injunctive relief under applicable law, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters. We dispute IMECAS’s claims and intend to vigorously defend against them.



FINANCIAL STATEMENTS	Notes to Financial Statements	2025

Table of Contents

KEY TERMS

We use terms throughout our document that are specific to Intel or that are abbreviations that may not be commonly known or used. Below is a list of these terms used in our document.



TERM		DEFINITION

2009 Debentures		3.25% junior subordinated convertible debentures due 2039
5G		The next-generation mobile network, which is expected to bring dramatic improvements in network speeds and latency, and which we view as a transformative technology and opportunity for many industries
ADAS		Advanced driver-assistance systems
Adjacent products		All of our non-platform products for CCG, DCG, and IOTG, such as modem, Ethernet and silicon photonics, as well as Mobileye, Non-Volatile Memory Solutions Group (NSG), and Programmable Solutions Group (PSG) products. Combined with our platform products, adjacent products form comprehensive platform solutions to meet customer needs
ASIC		Application-specific integrated circuit
ASP		Average Selling Price
CODM		Chief operating decision maker
COVID-19		The infectious disease caused by the most recently discovered coronavirus (aka coronavirus 2 or SARS-CoV-2), which was declared a global pandemic by the World Health Organization
CPU		Processor or central processing unit
Data-centric businesses		Includes our Data Center Group (DCG), Internet of Things Group (IOTG), Mobileye, Non-Volatile Memory Solutions Group (NSG), Programmable Solutions Group (PSG), and all other businesses
EC		European Commission
Edge		Allocated resources that move, store, and process data closer to the source or point of service delivery
Form 10-K		Annual Report on Form 10-K
Form 10-Q		Quarterly Report on Form 10-Q
FPGA		Field-programmable gate array
IMFT		IM Flash Technologies, LLC
Internet of Things		Refers to the Internet of Things market in which we sell our IOTG and Mobileye products
IP		Intellectual property
McAfee		Business, post divestiture of Intel Security Group in Q2 2017, which we retained an interest in as part of our investment strategy
MD&A		Management's Discussion & Analysis
MG&A		Marketing, general and administrative
NAND		NAND flash memory
nm		Nanometer
OEM		Original equipment manufacturer
PC-centric business		Our Client Computing Group (CCG) business, including both platform and adjacent products
Platform products		A microprocessor (CPU) and chipset, a stand-alone SoC, or a multichip package, based on Intel® architecture. Platform products are primarily used in solutions sold through the CCG, DCG, and IOTG segments
PRQ		Product Release Qualification, which is the milestone when costs to manufacture a product are included in inventory valuation
QLC		Quad-level cell
R&D		Research and development
RSU		Restricted stock unit
SEC		U.S. Securities and Exchange Commission
SoC		System-on-Chip
SSD		Solid-state drive
TAM		Total addressable market
TLC		Triple-level cell
U.S. GAAP		U.S. Generally Accepted Accounting Principles



FINANCIAL STATEMENTS	Notes to Financial Statements	26

Table of Contents

MANAGEMENT'S DISCUSSION AND ANALYSIS ~~(MD&A)~~

Total revenue of $16.5 billion declined year over year as our data-centric businesses were down 7%; this was partially offset by 1% growth in our PC-centric business. Data-centric revenue was down compared to a year ago as cloud customers absorbed capacity, data center total addressable market (TAM) for the quarter contracted in the enterprise and government market segment, China demand weakened, and NAND pricing remained under pressure. Our PC-centric business was up driven by average selling price (ASP) strength with richer commercial segment mix and modem growth. PC client volume declined on small core supply constraint partially offset by sales pull-ins by customers in anticipation of tariff impacts. Lower platform unit sales and further margin compression on memory products resulted in lower gross margins and operating income, which was partially offset by executing the quarter with continued operating margin leverage~~. In the first six months we generated $12.5 billion~~ ~~of cash flow from operations and returned~~ ~~$8.4 billion~~ ~~to stockholders, including~~ ~~$2.8 billion~~ ~~in dividends and~~ ~~$5.6 billion~~ ~~in buybacks.~~For additional key highlights of ~~the~~our results of ~~our~~ operations, see "A Quarter in ~~Review."~~

Three Months Ended Six Months Ended
Q2 2019 Q2 2018 YTD 2019 YTD 2018
(Dollars in Millions, Except Per Share Amounts) Amount % of Net
Revenue Amount % of Net
Revenue Amount % of Net
Revenue Amount % of Net
Revenue
Net revenue $ 16,505
100.0 % $ 16,962
100.0 % $ 32,566
100.0 % $ 33,028
100.0 %
Cost of sales 6,627
40.2 % 6,543
38.6 % 13,599
41.8 % 12,878
39.0 %
Gross margin 9,878
59.8 % 10,419
61.4 % 18,967
58.2 % 20,150
61.0 %
Research and development 3,438
20.8 % 3,371
19.9 % 6,770
20.8 % 6,682
20.2 %
Marketing, general and administrative 1,589
9.6 % 1,725
10.2 % 3,122
9.6 % 3,625
11.0 %
Restructuring and other charges 184
1.1 % —
— % 184
0.6 % —
— %
Amortization of acquisition-related intangibles 50
0.3 % 50
0.3 % 100
0.3 % 100
0.3 %
Operating income 4,617
28.0 % 5,273
31.1 % 8,791
27.0 % 9,743
29.5 %
Gains (losses) on equity investments, net 170
1.0 % (203 ) (1.2 )% 604
1.9 % 440
1.3 %
Interest and other, net (63 ) (0.4 )% 459
2.7 % (124 ) (0.4 )% 357
1.1 %
Income before taxes 4,724
28.6 % 5,529
32.6 % 9,271
28.5 % 10,540
31.9 %
Provision for taxes 545
3.3 % 523
3.1 % 1,118
3.4 % 1,080
3.3 %
Net income $ 4,179
25.3 % $ 5,006
29.5 % $ 8,153
25.0 % $ 9,460
28.6 %

Earnings per share – diluted $ 0.92
$ 1.05
$ 1.79
$ 1.98



~~MD&A~~	~~Consolidated Results & Analysis~~	21

~~Table of Contents~~

~~REVENUE~~



	~~SEGMENT REVENUE WALKS $B~~
	~~Q2 2019 vs. Q2 2018~~		~~YTD 2019 vs. YTD 2018~~

~~Q2 2019 vs. Q2 2018~~

~~Our Q2 2019 revenue was $16.5 billion, down 3% from Q2 2018. The decrease in revenue was driven by our data-centric businesses, which were collectively down 7% as demand from enterprise~~Review" and government data center customers weakened and NSG ASPs declined due to lower NAND market pricing. Revenue for our PC-centric business grew by 1% year over year, primarily driven by ASP strength in our commercial market segment, despite a decline in unit sales.

~~YTD 2019 vs. YTD 2018~~

Our YTD 2019 revenue was $32.6 billion, down $462 million, or 1% from YTD 2018. Our data-centric businesses were collectively down 6% as demand from enterprise and government data center customers weakened and NSG ASPs declined due to lower NAND market pricing. Revenue for our PC-centric business was up 3% in the first half of 2019 compared to the first half of 2018.



~~MD&A~~	~~Consolidated Results & Analysis~~	22

~~Table of Contents~~

~~GROSS MARGIN~~

We derived most of our overall gross margin dollars from the sale of platform products in the CCG and DCG operating segments. Our overall gross margin dollars in Q2 2019 decreased by $541 million, or 5.2% compared to Q2 2018.

~~GROSS MARGIN $B~~

~~(Percentages in chart indicate gross margin as a percentage of total revenue)~~

(In Millions)
$ 9,878
Q2 2019 Gross Margin
(370 ) Lower gross margin from platform revenue
(310 ) Lower gross margin from adjacent businesses primarily due to lower margins on NAND, modem, and PSG
145
Lower period charges primarily due to lower factory start-up costs associated with our 10nm products
(6 ) Other
$ 10,419
Q2 2018 Gross Margin

$ 18,967
YTD 2019 Gross Margin
(385 ) Higher period charges primarily due to reserved non-qualified 10nm platform product in Q1 2019, offset by lower factory start-up costs associated with our 10nm products
(355 ) Lower gross margin from adjacent businesses due to lower NAND margins
(230 ) Lower gross margin from platform revenue
(195 ) Higher platform unit cost primarily from increased mix of performance products
(18 ) Other
$ 20,150
YTD 2018 Gross Margin



~~MD&A~~	~~Consolidated Results & Analysis~~	23

~~Table of Contents~~

~~OPERATING EXPENSES~~

Total research and development (R&D) and marketing, general and administrative (MG&A) expenses for Q2 2019 were $5.0 billion, down 1% from Q2 2018, and were $9.9 billion for YTD 2019, down 4% from YTD 2018. These expenses represent 30.5% of revenue for Q2 2019 and 30.0% of revenue for Q2 2018, and 30.4% of revenue in the first six months of 2019 and 31.2% of revenue in the first six months of 2018.



	~~RESEARCH AND DEVELOPMENT $B~~		~~MARKETING, GENERAL AND ADMINISTRATIVE $B~~

~~(Percentages indicate expenses as a percentage of total revenue)~~

~~RESEARCH AND DEVELOPMENT~~

~~Q2 2019 – Q2 2018~~

~~R&D increased by $67 million, or 2.0%, driven by the following:~~

+ ~~Investments in data-centric businesses~~

+ ~~Investments in process technology~~

- ~~Profit dependent compensation due to a decrease in net income~~

- ~~Ramp down of 5G smartphone modem business~~

~~YTD 2019 – YTD 2018~~

~~R&D increased by $88 million, or 1.3%, driven by the following:~~

+ ~~Investments in data-centric businesses~~

+ ~~Investments in process technology~~

- ~~Corporate spending efficiencies~~

- ~~Profit dependent compensation due to a decrease in net income~~

- ~~Ramp downof 5G smartphone modem business~~

~~MARKETING, GENERAL AND ADMINISTRATIVE~~

~~Q2 2019 – Q2 2018~~

~~MG&A decreased by $136 million, or 7.9%, driven by the following:~~

-~~Corporate spending efficiencies~~

- ~~Profit dependent compensation due to a decrease in net income~~

-~~Lack of expenses due to the Wind River Systems, Inc. (Wind River) divestiture in Q2 2018~~

~~YTD 2019 – YTD 2018~~

~~MG&A decreased by $503 million, or 13.9%, driven by the following:~~

-~~Corporate spending efficiencies~~

- ~~Profit dependent compensation due to a decrease in net income~~

-~~Lack of expenses due to the Wind River divestiture in Q2 2018~~



~~MD&A~~	~~Consolidated Results & Analysis~~	24

~~Table of Contents~~

~~CLIENT COMPUTING GROUP (CCG)~~

~~CCG~~is our largest business unit. The PC market remains a critical facet of our business, providing an important source of IP, scale, and cash flow. CCG is dedicated to delivering client computing end-user solutions, focusing on higher growth segments of 2-in-1, thin-and-light, commercial, and gaming, as well as growing adjacencies such as WiFi and Thunderbolt™ technology. CCG is the human edge in a data-centric world. We deploy platforms that connect people to data and analytics, allowing each person to focus, create, and connect in ways that unlock their individual potential.

We will be exiting the 5G smartphone modem business, while continuing to meet current customer commitments for our existing 4G smartphone modem product lines. We are assessing opportunities for 4G and 5G modems in PCs, as well as Internet of Things and other data-centric devices.



	~~CCG REVENUE $B~~		~~CCG OPERATING INCOME $B~~



	■~~Platform~~	■~~Adjacent~~

~~REVENUE SUMMARY~~

Our revenue in Q2 2019 was up 1% compared to Q2 2018, and YTD 2019 up 3% compared to YTD 2018. Revenue increased year over year and year to date driven by ASP strength with richer commercial segment mix, modem growth, and tariff pull-ins, offset by platform volume decline as we experienced small core supply constraints.

Q2 2019 vs. Q2 2018 YTD 2019 vs. YTD 2018
(Dollars in Millions) % $ Impact % $ Impact

Desktop platform volume down (11)% $ (308 ) down (9)% $ (525 )
Desktop platform ASP up 5% 121
up 6% 317
Notebook platform volume down (2)% (109 ) down (4)% (432 )
Notebook platform ASP up 3% 160
up 8% 720
Adjacent products and other 249
399

Total change in revenue $ 113
$ 479

~~OPERATING INCOME SUMMARY~~

~~Operating income in Q2 2019 increased 16% from Q2 2018, with an operating margin of 42%. Operating income YTD 2019 increased 13% from YTD 2018, with an operating margin of 39%.~~



~~MD&A~~	~~Segment Results & Analysis~~	25

~~Table of Contents~~

(In Millions)
$ 3,737
Q2 2019 CCG Operating Income
400
Lower period charges primarily due to lower factory start-up costs associated with our 10nm process technology
120
Lower operating expenses partially driven by lower investment in modem
(17 ) Other
$ 3,234
Q2 2018 CCG Operating Income

$ 6,809
YTD 2019 CCG Operating Income
300
Higher gross margin from platform revenue
285
Lower operating expenses partially driven by lower investment in modem
130
Lower period charges from factory start-up costs, offset by reserved non-qualified platform product associated with our 10nm process technology taken in Q1 2019
110
Higher gross margin from adjacent businesses, primarily due to lack of initial production costs of modem products
(41 ) Other
$ 6,025
YTD 2018 CCG Operating Income
"Our Pandemic Response."

DATA CENTER GROUP ~~(DCG)~~

DCG develops workload-optimized platforms for compute, storage, and network functions. ~~Customers~~Market segments include cloud service providers, enterprise and government, and communications service providers. ~~DCG is fueled by demand in key workloads like artificial intelligence~~We offer customers an unmatched, broad portfolio of platforms and technologies designed to provide workload-optimized performance across compute, storage, and network. These offerings span the full spectrum from the data center core to the network ~~function virtualization across key market segments.~~edge.



	DCG REVENUE $B		DCG OPERATING INCOME $B



	■ Platform	■ Adjacent

REVENUE SUMMARY

Revenue ~~decreased~~ in Q2Q1 2020 was up 43% compared to Q1 2019 driven by increased volume and strong mix of platform products resulting in ~~YTD 2019 due to a decline in platform volume. Cloud customers absorbed capacity, China demand weakened, and TAM contracted~~higher ASPs. In Q1 2020, revenue in the cloud service providers market segment was up 53% as cloud service providers added capacity to serve demand. The enterprise and government market ~~segment. In~~segment was up 34%, and the communications service providers market segment was up 33% year over year.

We expect continued strength from cloud service providers and communications service providers in Q2 ~~2019, revenue~~2020, and anticipate demand in the enterprise and government segment ~~was down 31%, cloud service providers segment was down 1%, and~~to weaken in the ~~communication service providers segment was up 3% year over year.~~second half of 2020.


	Q2 2019 vs. Q2 2018					YTD 2019 vs. YTD 2018					Q1 2020 vs. Q1 2019
(Dollars in Millions)	%		$ Impact			%		$ Impact			%		$ Impact

Platform volume	down	(12)%	$	(627	)	down	(10)%	$	(989	)	up	27%	$	1,230
Platform ASP	up	2%	80			up	1%	100			up	13%	715
Adjacent products	down	(4)%	(19		)	down	(1)%	(9		)	up	35%	146

Total change in revenue			$	(566	)			$	(898	)			$	2,091

OPERATING INCOME SUMMARY

Operating income in Q1 2020 increased 90% from Q1 2019, with an operating margin of 50%.



(In Millions)
$	3,492		Q1 2020 DCG Operating Income
1,785			Higher gross margin from platform revenue
(80		)	Higher operating expenses
(54		)	Other
$	1,841		Q1 2019 DCG Operating Income



MD&A	~~Segment Results & Analysis~~	26

~~Table of Contents~~

~~OPERATING INCOME SUMMARY~~

~~Operating income in Q2 2019 decreased 34% from Q2 2018, with an operating margin of 36%. Operating income YTD 2019 decreased 32% from YTD 2018, with an operating margin of 37%.~~

(In Millions)
$ 1,800
Q2 2019 DCG Operating Income
(465 ) Lower gross margin from platform revenue
(240 ) Higher period charges, primarily associated with the initial ramp of 10nm
(205 ) Higher DCG operating expenses
(27 ) Other
$ 2,737
Q2 2018 DCG Operating Income

$ 3,641
YTD 2019 DCG Operating Income
(760 ) Lower gross margin from platform revenue
(470 ) Higher period charges, primarily associated with the initial ramp of 10nm
(375 ) Higher DCG operating expenses
(93 ) Other
$ 5,339
YTD 2018 DCG Operating Income



~~MD&A~~	~~Segment Results & Analysis~~	27

Table of Contents

INTERNET OF THINGS

As more intelligence is moving to the edge, more industries ~~want to harness~~are harnessing the power of data to create business value, to innovate, and to grow. We are using our architecture, accelerators, and software assets, combined with scale and partners, to develop a growing Internet of Things portfolio. Our Internet of Things portfolio is comprised of our IOTG and Mobileye businesses.

IOTG develops high-performance compute for targeted verticals and embedded markets. Our customers include retailers, manufacturers, health care providers, energy companies, automakers, and governments. We facilitate our customers creating, storing, and processing data generated by connected devices to accelerate business transformations.

Mobileye is the global leader in ~~the development~~driving assistance and automation solutions. Our product portfolio employs a broad set of technologies, covering computer vision and machine learning-based sensing, data analysis, localization, mapping, and driving policy technology for ~~advanced driver assistance systems (ADAS)~~ADAS and autonomous driving. Mobileye’s ~~advanced~~ ADAS products form the building blocks for higher levels of ~~autonomy that are being pursued by the automotive industry.~~autonomy. Our customers and strategic partners include major ~~U.S.~~global OEMs and ~~global~~ Tier 1 automotive system integrators.



	INTERNET OF THINGS REVENUE $B		INTERNET OF THINGS OPERATING INCOME $B



■ IOTG	■ Mobileye	■ IOTG	■ Mobileye

REVENUE AND OPERATING INCOME SUMMARY

Q2Q1 2020 vs. Q1 2019 ~~vs. Q2 2018~~

IOTG ~~net~~ revenue was ~~$986~~$883 million, ~~up $106~~down $27 million, driven by weaker demand for IOTG platform products in industrial and retail due to higher platform unit sales and higher ASPs from favorable core mix, partially offset by lower revenue from our divestiture of Wind River in Q2 2018, which negatively impacted the revenue comparison by approximately $80 million. After adjustingCOVID-19. We expect this weakening to continue for the ~~Wind River divestiture, IOTG revenue grew 23% year over~~rest of the year. Operating income was ~~$294~~$243 million, down $8 million year over year.

Mobileye recognized record revenue of $254 million, up ~~$51 million, primarily driven by higher platform revenue from core mix.~~

~~Mobileye net revenue was $201 million, up $28~~$45 million, due to our growing market share and the increasing adoption of ~~ADAS.~~our ADAS solutions. Operating income was ~~$53~~$88 million, up $9$20 million.

~~YTD 2019 vs. YTD 2018~~

~~IOTG net revenue was $1.9 billion, up $176 million, due~~ We expect demand will soften in 2020 as the effects of COVID-19 continue to $94 million higher platform unit sales and $158 million higher ASPs from favorable core mix, partially offset by lower revenue from our divestiture of Wind River in Q2 2018, which negatively impacted the revenue comparison by approximately $153 million year to date. After adjusting for the Wind River divestiture, IOTG revenue grew 21%. Operating income was $545 million, up $75 million, primarily driven by higher platform revenue from core mix.

~~Mobileye net revenue was $410 million, up $86 million due to increasing adoption of ADAS. Operating income was $121 million, up $67 million.~~

slow automotive production.



MD&A	~~Segment Results & Analysis~~	28

Table of Contents

NON-VOLATILE MEMORY SOLUTIONS GROUP ~~(NSG)~~

~~NSG's core offerings include~~NSG is a technology leader in next-generation memory and storage products based on breakthrough Intel^® Optane™ technology and Intel^® 3D NAND ~~Technology, driving innovation in SSDs and next-generation~~technology. NSG is disrupting the memory and storage ~~products.~~hierarchy with new tiers that balance capacity, performance, and cost. We offer 64-layer TLC and QLC NAND high-capacity SSDs, and unparalleled low latency and high performance with Intel^® Optane™ technology—both available in innovative new form factors and densities to address the memory and storage challenges our customers face in a rapidly evolving technological landscape. Our customers include enterprise and cloud-based data centers, and users of business and consumer desktops and laptops. ~~We are ramping 64-layer (64L) triple-level cell (TLC) and quad-level cell (QLC) NAND technologies, and Intel~~^® ~~Optane™ technology in innovative new form factors and densities to address the challenges our customers face in a rapidly evolving technological landscape.~~



	NSG REVENUE $B		NSG OPERATING INCOME $B

REVENUE AND OPERATING INCOME SUMMARY

Q2Q1 2020 vs. Q1 2019 ~~vs. Q2 2018~~

~~Net~~NSG recognized record revenue ~~was $940 million, down $139~~of $1.3 billion, up $423 million from ~~Q2 2018,~~Q1 2019, driven by ~~a $922 million impact from lower ASP due to lower NAND market pricing, offset by $783~~$358 million higher volume due to ~~an increase in~~strong demand for ~~component and data center SSD~~NAND products. ~~NSG had an~~Our lower operating loss of ~~$284~~$66 million in ~~Q2 2019, up $219 million from Q2 2018. While we~~Q1 2020, was due to continued ~~to see the ramp at Fab 68 drive cost~~ improvements ~~the decline~~ in ~~ASP more than offset the improved~~ unit cost, ~~resulting in lower gross margins and higher period charges being taken against certain inventories.~~

~~YTD 2019 vs. YTD 2018~~

~~Net revenue was $1.9 billion, down $264 million, driven by a $1.6 billion impact from lower ASP due to lower NAND~~ market pricing ~~offset by $1.3 billion higher volume due to an increase in demand for component~~recovery, and data center SSD products. NSG had an operating loss of $581 million, up $435 million. While we continued to see the ramp at Fab 68 drive cost improvements, the decline in ASP more than offset the improved unit cost, resulting in lower gross margins and higher period charges being taken against certain inventories.strong demand.



MD&A	~~Segment Results & Analysis~~	29

Table of Contents

PROGRAMMABLE SOLUTIONS GROUP ~~(PSG)~~

PSG offers programmable semiconductors, primarily ~~field-programmable gate array (FPGAs)~~FPGAs, structured ASICs, and related products, for a broad range of market segments, including communications, data center, industrial, and military. The PSG ~~collaborates with the other Intel businesses to deliver~~product portfolio delivers FPGA acceleration in tandem with Intel ~~microprocessors. This "better together" integration broadens the use of FPGAs~~microprocessors and ~~combines~~enables Intel to combine the benefits of ~~both~~its broad portfolio of technologies to allow more flexibility for systems to operate with increased efficiency and higher performance.



	PSG REVENUE $B		PSG OPERATING INCOME $B

REVENUE AND OPERATING INCOME SUMMARY

Q2Q1 2020 vs. Q1 2019 ~~vs. Q2 2018~~

Revenue was ~~$489~~$519 million, ~~down $28~~up $33 million ~~as softness~~due to growth in the cloud and enterprise ~~demand more than offset growth in 5G/wireless. Advanced products (28nm, 20nm, and 14nm process technologies) grew 15% year over year. Operating income was $52 million, down $49 million.~~

~~YTD 2019 vs. YTD 2018~~

~~Revenue was $975 million, down $40 million, driven by a decline in our cloud and enterprise~~market segment, partially offset by ~~strength~~weaker embedded and communications. PSG experienced growth in ~~wireless and~~ advanced ~~products (28nm, 20nm, and 14nm process technologies).~~products. Operating income was ~~$141~~$97 million, ~~down $57~~up $8 million.



MD&A	~~Segment Results & Analysis~~	30

Table of Contents

CLIENT COMPUTING GROUP

As we evolve to deliver leading end-to-end products across architectures and workloads for the data explosion, CCG’s contribution is the human touchpoint of this new data-centric era—the PC. As the largest business unit at Intel, CCG deploys platforms that connect people to data, allowing each person to focus, create, and engage in ways that unlock their individual potential. The PC market remains a critical facet of our business, providing an important source of IP, scale, and cash flow. Our mission is to continue to deliver leadership products in our PC business as well as our adjacent businesses. The PC is more essential than ever before with more people working and learning from home due to COVID-19-related shelter-in-place orders. We are dedicated to helping people around the world overcome this crisis.



	CCG REVENUE $B		CCG OPERATING INCOME $B



	■Platform	■Adjacent

REVENUE SUMMARY

Revenue in Q1 2020 was up 14% compared to Q1 2019, driven by strong demand for notebook platform products and incremental LTE modem volume, offset slightly by lower ASPs due to increased small core mix. Strength in notebook platform products reflects the increased reliance on PCs as more people are working and learning from home due to COVID-19.

We expect this strength to continue for the first half of the year but anticipate PC TAM to decline in the second half of 2020.



	Q1 2020 vs. Q1 2019
(Dollars in Millions)	%		$ Impact

Desktop platform volume	down	(4)%	$	(143	)
Desktop platform ASP	up	4%	97
Notebook platform volume	up	22%	1,100
Notebook platform ASP	down	(3)%	(169		)
Adjacent products and other			304

Total change in revenue			$	1,189

OPERATING INCOME SUMMARY

Operating income in Q1 2020 increased 38% from Q1 2019, with an operating margin of 43%.



(In Millions)
$	4,225		Q1 2020 CCG Operating Income
710			Higher gross margin from platform revenue
700			Lower period charges primarily due to 2019 reserved non-qualified platform product
305			Lower operating expenses driven by lower investments in modem
(590		)	Higher platform unit cost due to ramp of 10nm products
28			Other
$	3,072		Q1 2019 CCG Operating Income



MD&A		31

Table of Contents

CONSOLIDATED RESULTS OF OPERATIONS



	Three Months Ended
	Q1 2020					Q1 2019
(Dollars in Millions, Except Per Share Amounts)	Amount			% of Net Revenue		Amount			% of Net Revenue
Net revenue	$	19,828		100.0	%	$	16,061		100.0	%
Cost of sales	7,812			39.4	%	6,972			43.4	%
Gross margin	12,016			60.6	%	9,089			56.6	%
Research and development	3,275			16.5	%	3,332			20.7	%
Marketing, general and administrative	1,541			7.8	%	1,583			9.9	%
Restructuring and other charges	162			0.8	%	—			—	%
Operating income	7,038			35.5	%	4,174			26.0	%
Gains (losses) on equity investments, net	(111		)	(0.6	)%	434			2.7	%
Interest and other, net	(313		)	(1.6	)%	(61		)	(0.4	)%
Income before taxes	6,614			33.4	%	4,547			28.3	%
Provision for taxes	953			4.8	%	573			3.6	%
Net income	$	5,661		28.6	%	$	3,974		24.7	%

Earnings per share—diluted	$	1.31				$	0.87



MD&A		32

Table of Contents

REVENUE



	SEGMENT REVENUE WALK $B

Q1 2020 vs. Q1 2019

Our Q1 2020 revenue was $19.8 billion, up $3.8 billion or 23% from Q1 2019. Compared to a year ago, our data-centric businesses were collectively up 34% as demand from data center customers continued to strengthen as cloud service providers increased capacity to serve customer demand. We also saw higher volume from strong demand for NAND products and an offset from weaker demand in IOTG. Revenue in our PC-centric business was up 14% year over year driven by strong notebook platform demand resulting from an increase in working and learning from home, and incremental growth in LTE modem.

GROSS MARGIN

We derived most of our overall gross margin from the sale of platform products in the CCG and DCG operating segments. Our overall gross margin dollars in Q1 2020 increased by $2.9 billion, or 32.2% compared to Q1 2019.

GROSS MARGIN $B

(Percentages in chart indicate gross margin as a percentage of total revenue)



(In Millions)
$	12,016		Q1 2020 Gross Margin
2,470			Higher gross margin from platform revenue
770			Lower period charges primarily due to 2019 reserved non-qualified platform product
335			Higher gross margin from adjacent businesses primarily due to NAND
(585		)	Higher platform unit cost primarily from increased mix of 10nm and performance products
(63		)	Other
$	9,089		Q1 2019 Gross Margin



MD&A		33

Table of Contents

OPERATING EXPENSES

Total R&D and MG&A expenses for Q1 2020 were $4.8 billion, down 2% from Q1 2019. These expenses represent 24.3% of revenue for Q1 2020 and 30.6% of revenue for Q1 2019.



	RESEARCH AND DEVELOPMENT $B		MARKETING, GENERAL AND ADMINISTRATIVE $B

(Percentages indicate expenses as a percentage of total revenue)

RESEARCH AND DEVELOPMENT

Q1 2020 vs. Q1 2019



R&D decreased by $57 million, or 1.7%, driven by the following:

-	Ramp down of 5G smartphone modem business
+	Investments in our PC and data-centric businesses
+	Investments in process technology
+	Profit dependent compensation

MARKETING, GENERAL AND ADMINISTRATIVE

Q1 2020 vs. Q1 2019



MG&A decreased by $42 million, or 2.7%, driven by the following:

-	Corporate spending efficiencies
+	Profit dependent compensation



MD&A		34

Table of Contents

GAINS (LOSSES) ON EQUITY INVESTMENTS AND INTEREST AND OTHER, NET


(In Millions)	Q2 2019			Q2 2018			YTD 2019			YTD 2018		Q1 2020			Q1 2019
Ongoing mark-to-market adjustments on marketable equity securities												$	(103	)	$	253
Observable price adjustments on non-marketable equity securities												79			8
Impairment charges												(143		)	(23		)
Sale of equity investments and other												56			196
Gains (losses) on equity investments, net	$	170		$	(203	)	$	604		$	440	$	(111	)	$	434

Interest and other, net	$	(63	)	$	459		$	(124	)	$	357	$	(313	)	$	(61	)

Gains (losses) on equity investments, net

We recognized a ~~net gain during Q2 2019 primarily due to a $340~~$103 million ~~dividend from McAfee, Inc. (McAfee) but partially offset by~~ ongoing mark-to-market ~~losses of $179 million, primarily related to our investment in Cloudera, Inc. (Cloudera). We recognized a net gain~~loss during the first ~~six~~three months of 2019 primarily due to dividends of $494 million from McAfee and ongoing mark-to-market gains from ASML Holdings N.V. (ASML), partially offset by ongoing mark-to-market losses from Cloudera. We have fully sold our equity investment in ASML.

~~We recognized ongoing mark-to-market net losses on our marketable equity securities of $235 million in Q2 2018,~~2020, primarily related to our interest in Cloudera ~~and~~Inc. During the first three months of 2019, we recognized ongoing mark-to-market ~~net~~ gains of ~~$371~~$253 million, primarily driven by our interest in ASML Holding N.V. (ASML).

We recognized $143 million of impairment charges on our non-marketable portfolio in the first ~~six~~three months of ~~2018, primarily related to~~2020 based on our ~~interests in ASML.~~assessment of the impact of recent public and private market volatility and tightening of liquidity.

We recognized $154 million of McAfee dividends during the first three months of 2019.

Interest and other, net

For the ~~six~~three months ended ~~June 29, 2019,~~March 28, 2020, we paid ~~$1.0~~$1.1 billion to satisfy conversion obligations for ~~$400~~$372 million of our $2.0 billion ~~3.25% junior subordinated 2039 convertible debentures~~2009 Debentures and recognized a loss of ~~$91~~$109 million in interest and other, net and ~~$712~~$750 million as a reduction in stockholders' equity related to the conversion feature. For the ~~six~~three months ended ~~June~~March 30, ~~2018,~~2019, we paid ~~$1.2 billion~~$862 million to satisfy conversion obligations for ~~$476~~$337 million of our ~~$2.0 billion 3.25% junior subordinated 2039 convertible debentures~~2009 Debentures and recognized a loss of ~~$130~~$76 million in interest and other, net and ~~$770~~$593 million as a reduction in stockholders' equity related to the conversion feature.

~~We recognized a net gain in Q2 2018 and for the first six months of 2018 primarily due to a $494 million gain on the divestiture of Wind River in Q2 2018.~~

PROVISION FOR TAXES


(Dollars in Millions)	Q2 2019			Q2 2018			YTD 2019			YTD 2018			Q1 2020			Q1 2019
Income before taxes	$	4,724		$	5,529		$	9,271		$	10,540		$	6,614		$	4,547
Provision for taxes	$	545		$	523		$	1,118		$	1,080		$	953		$	573
Effective tax rate	11.5		%	9.5		%	12.1		%	10.2		%	14.4		%	12.6		%

The increase in effective tax rate was ~~primarily~~ driven by a lower U.S. tax benefit derived from sales to non-U.S. customers and a one-time ~~benefits that occurred in the first six months of 2018.~~tax charge associated with a valuation allowance against a net operating loss deferred tax asset.



MD&A	~~Consolidated Results & Analysis~~	3135

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

We consider the following when assessing our liquidity and capital resources:


(Dollars in Millions)	Jun 29, 2019			Dec 29, 2018			Mar 28, 2020			Dec 28, 2019
Cash and cash equivalents, short-term investments, and trading assets	$	11,944		$	11,650		$	20,803		$	13,123
Other long-term investments	$	3,577		$	3,388		$	2,943		$	3,276
Loans receivable and other	$	1,691		$	1,550		$	1,294		$	1,239
Reverse repurchase agreements with original maturities greater than three months	$	350		$	250		$	350		$	350
Total debt	$	28,815		$	26,359		$	39,919		$	29,001
Temporary equity	$	247		$	419		$	—		$	155
Debt as percentage of permanent stockholders’ equity	38.4		%	35.4		%	52.3		%	37.4		%

Cash generated by operations is our primary source of liquidity. When assessing our sources of liquidity, we include investments as shown in the preceding table. We maintain a diverse investment portfolio that we continually analyze based on issuer, industry, and country. ~~When assessing our sources of liquidity, we include investments as shown in the preceding table.~~ Substantially all of our investments in debt instruments and financing receivables are in investment-grade securities.

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, 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 ~~June 29, 2019, $1.5 billion of~~March 28, 2020, we had no outstanding commercial ~~paper remained outstanding.~~paper.

We believe we have sufficient financial resources to meet our business requirements in the next 12 months, including capital expenditures for worldwide manufacturing and assembly and test; working capital requirements; and potential acquisitions, strategic investments, ~~dividends,~~ and ~~common~~dividends. As we enter a period of economic uncertainty, we took actions this quarter that further strengthen our liquidity. During the first three months of 2020 we issued a total of $10.3 billion aggregate principal amount of senior notes. Additionally, on March 24, 2020 we suspended the use of our financial resources for stock ~~repurchases.~~repurchases, having repurchased approximately $7.6 billion of our planned $20.0 billionrepurchases announced in October 2019. The suspension of stock repurchases will not impact dividend payments to stockholders and the company has the ability to reinstate stock repurchases as circumstances warrant.



CASH FROM OPERATIONS $B	CAPITAL EXPENDITURES $B	CASH TO STOCKHOLDERS $B



				■ Dividends ■ Buybacks


	Six Months Ended						Three Months Ended
(In Millions)	Jun 29, 2019			Jun 30, 2018			Mar 28, 2020			Mar 30, 2019
Net cash provided by operating activities	$	12,546		$	13,697		$	6,158		$	4,959
Net cash used for investing activities	(6,010		)	(5,984		)	(3,736		)	(2,722		)
Net cash provided by (used for) financing activities	(6,688		)	(8,532		)	4,764			(2,102		)
Net increase (decrease) in cash and cash equivalents	$	(152	)	$	(819	)	$	7,186		$	135



MD&A		36

Table of Contents

Operating Activities

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



~~MD&A~~	~~Consolidated Results & Analysis~~	32

~~Table of Contents~~

For the first ~~six~~three months of ~~2019~~2020 compared to the first ~~six~~three months of ~~2018,~~2019, the ~~$1.2 billion decrease~~increase in cash provided by operations was ~~primarily attributable~~due to higher net income offset by changes in working capital and lower net income. Cash flow related to working capital was down as customers utilized supply agreement prepayments, and as we continued to build inventory. These working capital changes were partially offsetdriven by ~~changes in income tax and~~ other assets and liabilities ~~balances.~~and accounts receivable.

Investing Activities

Investing cash flows consist primarily of capital expenditures; investment purchases, sales, maturities, and disposals; and proceeds from divestitures and cash used for acquisitions.

Cash used for investing activities was ~~flat for~~higher in the first ~~six~~three months of ~~2019~~2020 compared to the first ~~six~~three months of ~~2018. Trading asset activity was offset by increased~~2019 primarily due to decreased sales of equity investments (substantially all from ASML sales) ~~and reduced capital expenditures.~~.

Financing Activities

Financing cash flows consist primarily of repurchases of common stock, payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, and proceeds from the sale of shares of common stock through employee equity incentive plans.

Cash was provided by financing activities in the first three months of 2020 compared to cash used for financing activities ~~was lower~~ in the first ~~six~~three months of 2019 ~~compared to the first six months of 2018~~primarily due to ~~collateral received for our fair value hedges associated with our senior notes and cash received from issuance of~~increased long-term debt ~~partially~~issuances offset by ~~repayment~~increased repurchases of ~~commercial paper.~~common stock and reduced proceeds from short-term debt.

CONTRACTUAL OBLIGATIONS

During Q1 2020, we issued a total of $10.3 billion aggregate principal amount of senior notes. Our remaining total cash payments over the life of these long-term debt obligations are expected to be approximately $19.1 billion. These payments include anticipated interest on fixed rate debt that is not recorded on the Consolidated Condensed Balance Sheets. For further information, see "Note 8: Borrowings" within the Consolidated Condensed Financial Statements and Supplemental Details.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are affected by changes in currency exchange and interest rates, as well as equity and commodity prices. ~~For discussion about market~~Our risk management programs are designed to reduce, but may not entirely eliminate, the impacts of these risks. We performed sensitivity analyses of these risks to our financial positions as of December 28, 2019, and updated that sensitivity analysis ~~related~~as of March 28, 2020, to determine whether material changes in market risks pertaining to currency ~~exchange rates,~~and interest rates or equity ~~prices,~~ and commodity prices ~~refer to~~have occurred as a result of the COVID-19 pandemic. No material revisions were noted since disclosing "Quantitative and Qualitative Disclosures About Market Risk" within ~~"MD~~MD&A," in our ~~Annual Report on~~2019 Form ~~10-K for the fiscal year ended December 29, 2018 (2018 Form 10-K).~~10-K. Risks related to a slowdown or recession are described below under “Risk Factors.”



MD&A	~~Consolidated Results & Analysis~~	3337

Table of Contents

NON-GAAP FINANCIAL MEASURES

In addition to disclosing financial results in accordance with U.S. 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 the financial performance of our business, enable comparison of financial 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.

Our non-GAAP financial measures reflect adjustments based on one or more of the following items, as well as the related income tax effects where applicable. Income tax effects have been calculated using an appropriate tax rate for each adjustment. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from these results should be carefully evaluated.



Non-GAAP adjustment or measure	Definition	Usefulness to management and investors
Acquisition-related adjustments	Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. Charges related to the amortization of these intangibles are recorded within both cost of sales and MG&A in our U.S. GAAP financial statements. Amortization charges are recorded over the estimated useful life of the related acquired intangible asset, and thus are generally recorded over multiple years.	We exclude amortization charges for our acquisition-related intangible assets for purposes of calculating certain non-GAAP measures because these charges are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. These adjustments facilitate a useful evaluation of our current operating performance and comparison to our past operating performance and provide investors with additional means to evaluate cost and expense trends.
Restructuring and other charges	Restructuring charges are costs associated with a formal restructuring plan and are primarily related to employee severance and benefit arrangements. Other charges include asset impairments, pension charges, and costs associated with restructuring activity.	We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures because these costs do not reflect our current operating performance and are significantly impacted by the timing of restructuring activity. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends.
Ongoing mark-to-market on marketable equity securities	After the initial mark-to-market adjustment is recorded upon a security becoming marketable, gains and losses are recognized from ongoing mark-to-market adjustments of our marketable equity securities.	We exclude these ongoing gains and losses for purposes of calculating certain non-GAAP measures because we do not believe this volatility correlates to our core operational performance. These adjustments facilitate a useful evaluation of our current operating performance and comparisons to past operating results.
Free cash flow	We reference a non-GAAP financial measure of free cash flow, which is used by management when assessing our sources of liquidity, capital resources, and quality of earnings. Free cash flow is operating cash flow adjusted to exclude additions to property, plant, and equipment.	This non-GAAP financial measure is helpful in understanding our capital requirements and provides an additional means to evaluate the cash flow trends of our business.



MD&A		38

Table of Contents

Following are the reconciliations of our most comparable U.S. GAAP measures to our non-GAAP measures presented:



	Three Months Ended
(In Millions, Except Per Share Amounts)	Mar 28, 2020			Mar 30, 2019
Operating income	$	7,038		$	4,174
Acquisition-related adjustments	339			331
Restructuring and other charges	162			—
Non-GAAP operating income	$	7,539		$	4,505

Operating margin	35.5		%	26.0		%
Acquisition-related adjustments	1.7		%	2.1		%
Restructuring and other charges	0.8		%	—		%
Non-GAAP operating margin	38.0		%	28.0		%

Earnings per share—diluted	$	1.31		$	0.87
Acquisition-related adjustments	0.08			0.07
Restructuring and other charges	0.04			—
Ongoing mark-to-market on marketable equity securities	0.03			(0.05		)
Income tax effect	(0.01		)	—
Non-GAAP earnings per share—diluted	$	1.45		$	0.89

Net cash provided by operating activities	$	6,158		$	4,959
Additions to property, plant and equipment	(3,268		)	(3,321		)
Free cash flow	$	2,890		$	1,638

Net cash used for investing activities	$	(3,736	)	$	(2,722	)
Net cash provided by (used for) financing activities	$	4,764		$	(2,102	)



MD&A		39

Table of Contents

OTHER KEY INFORMATION

RISK FACTORS

The risks described in "Risk Factors" within ~~"Other~~Other Key ~~Information"~~Information in our ~~2018~~2019 Form 10-K could materially and adversely affect our business, financial condition, and results of operations, and the trading price of our common stock could decline. In addition to our discussion in “Our Pandemic Response,” MD&A, and other sections of this report to address effects of the COVID-19 pandemic, we have provided an additional risk factor regarding COVID-19 below and have updated the risk factors included in our 2019 Form 10-K titled "Global or regional conditions can harm our financial results" and "Catastrophic events can have a material adverse effect on our operations and financial results." As discussed below, the impact of COVID-19 can also exacerbate other risks discussed in the Risk Factors sections of our 2019 Form 10-K and this report, which could in turn have a material adverse effect on us. The Risk Factors section in our 2019 Form 10-K otherwise remains current in all material respects. These risk factors do not identify all risks that we face—our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. ~~Below,~~

The COVID-19 pandemic could materially adversely affect our financial condition and results of operations. The novel strain of the coronavirus identified in China in late 2019 (COVID-19) has globally spread throughout other areas such as Asia, Europe, the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. 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. We have significant manufacturing operations in the U.S., Ireland, Israel, China, Malaysia, and Vietnam, and each of these countries has been affected by the outbreak and taken measures to try to contain it. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.

There is considerable uncertainty regarding the business impacts from such measures and potential future measures. While we have ~~updated~~been able to operate our factories on a relatively normal basis to date, shelter-in-place orders and other measures, including work-from-home and social distancing policies implemented to protect employees, have resulted in reduced workforce availability at some of our sites, construction delays, and reduced capacity at some of our vendors and suppliers. Restrictions on our access to or operation of our manufacturing facilities or on our 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 our financial condition and results of operations, particularly if prolonged. Similarly, current and future restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, can also impact our ability to meet demand and could materially adversely affect us. Our customers have experienced, and may continue to experience, disruptions in their operations and supply chains, which can result in delayed, reduced, or canceled orders, or collection risks, and which may adversely affect our results of operations. We have paused new construction projects at several of our manufacturing sites due to local government restrictions. Our current expectation that these interruptions will have a minimal impact on our product ramps and will not affect our timelines for process technology transitions could prove to be inaccurate, and it is possible our plans could be adversely affected to the extent these interruptions are prolonged, additional projects are paused, or other unexpected consequences impacting production occur.

The pandemic has significantly increased economic and demand uncertainty. It is likely that the current outbreak and continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. There is a significant degree of uncertainty and lack of visibility as to the extent and duration of any such slowdown or recession. Risks related to a slowdown or recession are described in our risk factor ~~included in our 2018 Form 10-K~~ titled ~~"Global~~“Global or regional conditions ~~may~~can harm our financial ~~results."~~ results,” below, and include the risk that demand for our products will be significantly harmed. We are currently seeing negative impacts on demand in some of our businesses, and are expecting slowing economic conditions to adversely affect those and certain other segments in the second half of 2020, as discussed in the “Our Pandemic Response” section of this report. Given the significant economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on demand for our products. These expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.

The pandemic has led to increased disruption and volatility in capital markets and credit markets. We issued over $10 billion in new debt in Q1 2020 and announced the suspension of our stock repurchases on March 24, 2020 to strengthen our liquidity position given the uncertainty regarding the length and severity of the pandemic and ongoing economic uncertainty. Unanticipated consequences of the pandemic and resulting economic uncertainty could adversely affect our liquidity and capital resources in the future. Market volatility has negatively impacted, and may continue to negatively impact, our equity investment portfolio.

The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development, validation, and qualification, customer support, and other activities, which could have an adverse effect on our operations. 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 key personnel and harm our ability to perform critical functions.



OTHER KEY INFORMATION		40

Table of Contents

The degree to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption, and how quickly and to what extent normal economic and operating conditions can resume. We are similarly unable to predict the degree to which the pandemic impacts our customers, suppliers, vendors, and other partners, and their financial conditions, but a material effect on these parties could also adversely affect us. The impact of COVID-19 can also exacerbate other risks discussed in the Risk Factors ~~section in~~sections of our ~~2018~~2019 Form 10-K ~~otherwise remains current~~and this report, which could in ~~all~~turn have a material ~~respects.~~adverse effect on us. Developments related to COVID-19 have been rapidly changing, and additional impacts and risks may arise that we are not aware of or able to appropriately respond to currently.

Global or regional conditions ~~may~~can harm our financial results. We have manufacturing, assembly and test, R&D, sales, and other operations in many countries, and some of our business activities ~~may be~~are concentrated in one or more geographic areas. Moreover, sales outside the U.S. accounted for approximately ~~84%~~78% of our revenue for the fiscal year ended December ~~29, 2018,~~ 28, 2019, with revenue from billings to China, including Hong Kong, contributing approximately ~~27%~~28% of our total ~~revenue~~.revenue. As a result, our operations and our financial results, including our ability to manufacture, assemble and test, design, develop, or sell products, and the demand for our products, ~~may be~~are at times adversely affected by a number of global and regional factors outside of our control.

Adverse changes in global or regional economic conditions, including recession or slowing growth, changes or uncertainty in fiscal, monetary, or ~~monetary~~trade policy, higher interest rates, tighter credit, inflation, lower capital expenditures by businesses including on IT infrastructure, increases in unemployment, and lower consumer confidence and spending, periodically occur. The COVID-19 pandemic has significantly increased economic and demand uncertainty. It is likely that the current outbreak and continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. Adverse changes in economic conditions, including as a result of the pandemic, can significantly harm demand for our products and make it more challenging to forecast our operating results and make business decisions, including regarding prioritization of investments in our business. An economic downturn or increased uncertainty may also lead to increased credit and collectability risks, higher borrowing costs or ~~limits on our access to~~reduced availability of capital markets, reduced liquidity, adverse impacts on our suppliers, failures of counterparties ~~and other~~including financial institutions and insurers, asset impairments, and declines in the value of our financial instruments.

International trade disputes ~~may~~at times result in increased tariffs, trade barriers, and other protectionist measures that ~~could~~can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers, limit our ability to procure components or raw materials, or impede or slow the movement of our goods across borders. Increasing protectionism and economic nationalism may lead to further changes in trade policy, domestic sourcing initiatives, or other formal and informal measures that could make it more difficult to sell our products in, or restrict our access to, some markets.

Escalating trade tensions between the U.S. and China have led to increased tariffs and trade restrictions, including tariffs applicable to some of our ~~products.~~products, and have affected customer ordering patterns. The U.S. has ~~previously~~ imposed ~~and continues to impose,~~ restrictions on the export of U.S.-regulated products and technology to certain Chinese technology companies, ~~which have included, and continue to include,~~including certain of our customers. These restrictions have reduced our sales, and continuing or future restrictions could adversely affect our financial results, result in reputational harm to us due to our relationship with such companies, or lead such companies to develop or adopt technologies that compete with our products. It is difficult to predict what further trade-related actions governments may take, which may include additional or increased tariffs and trade restrictions, and we may be unable to quickly and effectively react to such actions. For example, U.S. legislation has expanded the power of the U.S. Department of Commerce to restrict the export of “emerging and foundational technologies” yet to be identified, which could impact our current or future products.

Trade disputes and protectionist measures, or continued uncertainty about such matters, could result in declining consumer confidence and slowing economic growth or recession, and could cause our customers to reduce, cancel, or alter the timing of their purchases with us. Sustained trade tensions could lead to long-term changes in global trade and technology supply chains, which could adversely affect our business and growth prospects.

We ~~may~~can be adversely affected by other global and regional factors that periodically occur, including:

geopolitical and security issues, such as armed conflict and civil or military unrest, political instability, human rights concerns, and terrorist ~~activity;~~activity, including, for example, geopolitical tensions and conflict affecting Israel, where our Mobileye business headquarters and certain of our fabrication facilities are located;

natural disasters, public health issues (including the COVID-19 pandemic discussed further in the risk factor “The COVID-19 pandemic could materially adversely affect our financial condition and results of operations,” above), and other catastrophic events;

inefficient infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers;

formal or informal imposition of new or revised export, import, or doing-business regulations, including trade sanctions, tariffs, and changes in the ability to obtain export licenses, which could be changed without notice;

government restrictions on, or nationalization of, our operations in any country, or restrictions on our ability to repatriate earnings from a particular country;

adverse changes relating to government grants, tax credits, or other government incentives;

differing employment practices and labor issues;

ineffective legal protection of our IP rights in certain countries;



OTHER KEY INFORMATION		41

Table of Contents

local business and cultural factors that differ from our current standards and practices;

continuing uncertainty regarding social, political, immigration, and tax and trade policies in the U.S. and abroad, including as a result of the United Kingdom's ~~vote to withdraw~~withdrawal from the European Union; ~~and~~

fluctuations in the market values of our domestic and international investments, which can be negatively affected by liquidity, credit deterioration or losses, interest rate changes, financial results, political risk, sovereign risk, or other ~~factors.~~factors; and

uncertainty regarding LIBOR—certain of our interest rate derivatives and investments are based on LIBOR, and a portion of our indebtedness bears interest at variable interest rates, primarily based on LIBOR: LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform, which may cause LIBOR to disappear entirely after 2021 or to perform differently than in the past, and while we expect that reasonable alternatives to LIBOR will be implemented prior to the 2021 target date, we cannot predict the consequences and timing of these developments, and they could include an increase in our interest expense and/or a reduction in our interest income.



~~OTHER KEY INFORMATION~~		34

~~Table of Contents~~

We are subject to laws and regulations worldwide that ~~may~~ differ among jurisdictions, affecting our operations in areas including, but not limited to: IP ownership and infringement; tax; import and export requirements; anti-corruption; foreign exchange controls and cash repatriation restrictions; data privacy requirements; competition; advertising; employment; product regulations; environment, health, and safety requirements; and consumer laws. Compliance with such requirements ~~may~~can be onerous and expensive, and may otherwise impact our business operations negatively. For example, unfavorable developments with evolving laws and regulations worldwide related to 5G or autonomous driving technology may limit global adoption, impede our strategy, and negatively impact our long-term expectations for our investments in these areas. Expanding privacy legislation and compliance costs of privacy-related and data protection measures could adversely affect our customers and their products and services, particularly in cloud, Internet of Things, and AI applications, which could in turn reduce demand for our products used for those workloads.

Although we have policies, controls, and procedures designed to help ensure compliance with applicable laws, there can be no assurance that our employees, contractors, suppliers, ~~and/~~or agents will not violate such laws or our policies. Violations of these laws and regulations ~~could~~can result in fines; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business; and damage to our reputation. The technology industry is subject to intense media, political, and regulatory scrutiny, which can increase our exposure to government investigations, legal actions, and penalties.

Catastrophic events can have a material adverse effect on our operations and financial results.Our operations and business, and those of our customers and suppliers, can be disrupted by natural disasters; industrial accidents; public health issues (including the COVID-19 pandemic discussed further in the risk factor “The COVID-19 pandemic could materially adversely affect our financial condition and results of operations,” above); cybersecurity incidents; interruptions of service from utilities, transportation, telecommunications, or IT systems providers; manufacturing equipment failures; or other catastrophic events. For example, we have at times experienced disruptions in our manufacturing processes as a result of power outages, improperly functioning equipment, and disruptions in supply of raw materials or components, including due to cybersecurity incidents affecting our suppliers. Our headquarters and many of our operations and facilities are in locations that are prone to earthquakes and other natural disasters. Global climate change can result in certain natural disasters occurring more frequently or with greater intensity, such as drought, wildfires, storms, sea-level rise, and flooding, and could disrupt the availability of water necessary for the operation of our fabrication facilities located in semi-arid regions. Catastrophic events could make it difficult or impossible to manufacture or deliver products to our customers, receive production materials from our suppliers, or perform critical functions, which could adversely affect our revenue and require significant recovery time and expenditures to resume operations. While we maintain business recovery plans that are intended to enable us to recover from natural disasters or other events that can be disruptive to our business, some of our systems are not fully redundant and we cannot be sure that our plans will fully protect us from all such disruptions. Furthermore, even if our operations are unaffected or recover quickly, if our customers cannot timely resume their own operations due to a catastrophic event, they may reduce or cancel their orders, which may adversely affect our results of operations.

We maintain a program of insurance coverage for a variety of property, casualty, and other risks. The types and amounts of insurance we obtain vary depending on availability, cost, and decisions with respect to risk retention. Some of our policies have large deductibles and broad exclusions. In addition, one or more of our insurance providers may be unable or unwilling to pay a claim. Losses not covered by insurance may be large, which could harm our results of operations and financial condition.



OTHER KEY INFORMATION		42

Table of Contents

CONTROLS AND PROCEDURES

Inherent Limitations on Effectiveness of Controls

Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Evaluation of Disclosure Controls and Procedures

Due to the COVID-19 pandemic, a significant portion of our employees are now working from home, while also under shelter-in-place orders or other restrictions. Established business continuity plans were activated in order to mitigate the impact to our control environment, operating procedures, data and internal controls. The design of our processes and controls allow for remote execution with accessibility to secure data.

Based on management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~June 29, 2019~~March 28, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Inherent Limitations on Effectiveness of Controls~~

~~NON-GAAP FINANCIAL MEASURES~~

In addition to disclosing financial results in accordance with GAAP, this document contains references to the non-GAAP financial measures included in the table below. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial 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.

Our non-GAAP operating income and diluted earnings per share reflect adjustments for one or more of the following items, as well as the related income tax effects. Income tax effects have been calculated using an appropriate tax rate for each adjustment. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.

~~Amortization of acquisition-related intangible assets~~

Amortization of acquisition-related intangible assets consists of amortization of intangible assets such as developed technology, brands, and customer relationships acquired in connection with business combinations. We record charges related to the amortization of these intangibles within both cost of sales and operating expenses in our GAAP financial statements. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions, rather than our core operations. Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

~~Restructuring and other charges~~

Restructuring charges are costs associated with a formal restructuring plan and are primarily related to employee severance and benefit arrangements. Other charges include asset impairments. We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures. We believe that these costs do not reflect our current operating performance. Consequently, our non-GAAP adjustments exclude these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.



~~OTHER KEY INFORMATION~~		35

~~Table of Contents~~

~~Gains or losses from divestiture~~

We divested Wind River in Q2 2018 and recognized an associated gain. Our non-GAAP earnings per share figures exclude this impact to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

~~Ongoing mark-to-market on marketable equity securities~~

We exclude gains and losses resulting from ongoing mark-to-market adjustments of our marketable equity securities, after the initial mark-to-market adjustment is recorded upon a security becoming marketable, when calculating certain non-GAAP measures, as we do not believe this volatility correlates to our core operational performance. Consequently, our non-GAAP earnings per share figures exclude these impacts to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.

~~Tax Reform adjustment~~

During Q2 2018, we made an adjustment to our U.S. Tax Cuts and Jobs Act (Tax Reform) provisional tax estimates that we recorded in Q4 2017. We exclude this provisional tax adjustment when calculating certain non-GAAP measures. We believe excluding this adjustment facilitates a better evaluation of our current operating performance and comparisons to past operating performance.

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

Three Months Ended
(In Millions, Except Per Share Amounts) Jun 29,
2019 Jun 30,
2018
Operating income $ 4,617
$ 5,273
Amortization of acquisition-related intangible assets 337
325
Restructuring and other charges 184
—
Non-GAAP operating income $ 5,138
$ 5,598

Earnings per share - diluted $ 0.92
$ 1.05
Amortization of acquisition-related intangible assets 0.08
0.07
Restructuring and other charges 0.04
—
(Gains) losses from divestiture —
(0.10 )
Ongoing mark-to-market on marketable equity securities 0.04
0.05
Tax Reform —
(0.04 )
Income tax effect (0.02 ) 0.01
Non-GAAP earnings per share - diluted $ 1.06
$ 1.04

ISSUER PURCHASES OF EQUITY SECURITIES

We have an ongoing authorization, originally approved by our Board of Directors in 2005 and subsequently amended, to repurchase shares of our common stock in open market or negotiated transactions. On March 24, 2020, we suspended stock repurchases in light of the COVID-19 pandemic and we have the ability to reinstate repurchases as circumstances warrant. As of ~~June 29, 2019,~~March 28, 2020, we were authorized to repurchase up to ~~$90.0~~$110.0 billion, of which ~~$11.7~~$19.7 billion remained available.

Common stock repurchase activity under our publicly announced stock repurchase program during the ~~second~~first quarter of ~~2019~~2020 was as follows:

Period Total Number
of Shares
Purchased
(In Millions) Average Price
Paid Per Share Dollar Value of
Shares That May
Yet Be Purchased
Under the Program
(In Millions)
March 31, 2019 - April 27, 2019 4.7
$ 55.82
$ 14,621
April 28, 2019 - May 25, 2019 28.3
$ 46.27
$ 13,311
May 26, 2019 - June 29, 2019 34.2
$ 45.95
$ 11,739
Total 67.2



Period	Total Number of Shares Purchased (In Millions)	Average Price Paid Per Share		Dollar Value of Shares That May Yet Be Purchased Under the Program (In Millions)
December 29, 2019 - January 25, 2020	17.9	$	60.39	$	22,687
January 26, 2020 - February 22, 2020	17.2	$	66.27	$	21,547
February 23, 2020 - March 28, 2020	36.2	$	52.11	$	19,658
Total	71.3

We issue RSUs as part of our equity incentive plans. In our ~~consolidated condensed financial statements,~~Consolidated Condensed Financial Statements, we treat shares of common stock withheld for tax purposes on behalf of our employees in connection with the vesting of RSUs as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase program and accordingly are not included in the common stock repurchase totals in the preceding table.



OTHER KEY INFORMATION		3643

Table of Contents

EXHIBITS

Incorporated by Reference
Exhibit
Number
Exhibit Description Form File Number Exhibit
Filing
Date

Filed or
Furnished
Herewith
3.1
Third Restated Certificate of Incorporation of Intel Corporation, dated May 17, 2006
8-K 000-06217 3.1 5/22/2006
3.2
Intel Corporation Bylaws, as amended and restated on January 16, 2019
8-K 000-06217 3.2 1/17/2019
10.1†
Intel Corporation 2006 Equity Incentive Plan, as amended and restated effective May 16, 2019
X
10.2†
Offer Letter between Intel Corporation and George S. Davis, dated April 2, 2019
8-K 000-06217 10.1 4/3/2019
31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act
X
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
X
32.1
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350
X
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X
101.SCH XBRL Taxonomy Extension Schema Document X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB XBRL Taxonomy Extension Label Linkbase Document X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X
104
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

X

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File Number

Exhibit

Filing

Date

Filed or

Furnished

Herewith

3.1

Third Restated Certificate of Incorporation of Intel Corporation, dated May 17, 2006

8-K

000-06217

3.1

5/22/2006

3.2

Intel Corporation Bylaws, as amended and restated on January 16, 2019

8-K

000-06217

3.2

1/17/2019

4.1

Fourteenth Supplemental Indenture, dated as of February 13, 2020, between Intel Corporation and Wells Fargo Bank, National Association, as successor trustee

8-K

000-06217

4.1

2/13/2020

4.2

Fifteenth Supplemental Indenture, dated as of February 13, 2020, between Intel Corporation and Wells Fargo Bank, National Association, as successor trustee

8-K

000-06217

4.2

2/13/2020

4.3

Sixteenth Supplemental Indenture, dated as of March 25, 2020, between Intel Corporation and Wells Fargo Bank, National Association, as successor trustee

8-K

000-06217

4.1

3/25/2020

10.1^†

Intel Corporation Form of Restricted Stock Unit Grant Agreement under the 2006 Equity Incentive Plan (for performance-based RSUs granted to non-grandfathered executives on or after January 30, 2019)

10.2^†

Intel Corporation Executive Annual Performance Bonus Plan

8-K

000-06217

10.1

1/22/2020

10.3^†

Intel Corporation Sheltered Employee Retirement Plan Plus, as amended and restated effective January 1, 2020

31.1

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act

31.2

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act

32.1

Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File - formatted in Inline XBRL and included as Exhibit 101


^† ^†Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.	~~Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.~~



OTHER KEY INFORMATION		3744

Table of Contents

FORM 10-Q CROSS-REFERENCE INDEX



Item Number	Item
Part I - Financial Information
Item 1.	Financial Statements	Pages 36 - 2026
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations:
	Results of operations	Pages 2 - 5, 2127 - 3135
	Liquidity and capital resources	Pages 3236 - 3337
	Off-balance sheet arrangements	(a)
	Contractual obligations	~~(b)~~ Page 37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 3337
Item 4.	Controls and Procedures	Page 3543

Part II - Other Information
Item 1.	Legal Proceedings	Pages 1823 - 2025
Item 1A.	Risk Factors	Pages 3440 - 3542
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 3643
Item 3.	Defaults Upon Senior Securities	Not applicable
Item 4.	Mine Safety Disclosures	Not applicable
Item 5.	Other Information	Not applicable
Item 6.	Exhibits	Page 3744

Signatures		Page 3946


(a)	As of ~~June 29, 2019,~~March 28, 2020, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.


~~(b)~~	~~There were no material changes to our significant contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 29, 2018.~~



OTHER KEY INFORMATION		3845

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		INTEL CORPORATION (Registrant)

Date:	~~July 25, 2019~~April 23, 2020	By:	/s/ GEORGE S. DAVIS
			George S. Davis
			Executive Vice President, Chief Financial Officer and Principal Financial Officer

Date:	~~July 25, 2019~~April 23, 2020	By:	/s/ KEVIN T. MCBRIDE
			Kevin T. McBride
			Vice President of Finance, Corporate Controller and Principal Accounting Officer



		3946




$16.5B	$4.6B	$5.1B	$0.92	$1.06
GAAP	GAAP	non-GAAP¹	GAAP	non-GAAP¹
down $457M or 3% from Q2 2018	down $656M or 12% from Q2 2018	down $460M or 8% from Q2 2018	down $0.13 or 12% from Q2 2018	up $0.02 or 2% from Q2 2018

Declines in data-centric businesses generally, partially offset by growth in PC-centric business and Internet of Things	Lower gross margin from decrease in platform unit sales and NAND pricing degradation, partially offset by CPU ASP strength		Impact from lower platform volume, and NAND pricing pressure, partially offset by the receipt of McAfee, Inc. dividend, as well as lower shares outstanding



(In Millions)	Remainder of 2019		2020		2021		2022		2023		2024 and Thereafter		Total
Lease payments	$	93	$	173	$	122	$	96	$	70	$	107	$	661
Present value of lease payments													$	604



(In Millions)	2019		2020		2021		2022		2023		2024 and Thereafter		Total
Minimum rental commitments under all non-cancelable leases	$	229	$	181	$	133	$	101	$	70	$	121	$	835



(In Millions)
$	9,878		Q2 2019 Gross Margin
(370		)	Lower gross margin from platform revenue
(310		)	Lower gross margin from adjacent businesses primarily due to lower margins on NAND, modem, and PSG
145			Lower period charges primarily due to lower factory start-up costs associated with our 10nm products
(6		)	Other
$	10,419		Q2 2018 Gross Margin

$	18,967		YTD 2019 Gross Margin
(385		)	Higher period charges primarily due to reserved non-qualified 10nm platform product in Q1 2019, offset by lower factory start-up costs associated with our 10nm products
(355		)	Lower gross margin from adjacent businesses due to lower NAND margins
(230		)	Lower gross margin from platform revenue
(195		)	Higher platform unit cost primarily from increased mix of performance products
(18		)	Other
$	20,150		YTD 2018 Gross Margin



(In Millions)
$	3,737		Q2 2019 CCG Operating Income
400			Lower period charges primarily due to lower factory start-up costs associated with our 10nm process technology
120			Lower operating expenses partially driven by lower investment in modem
(17		)	Other
$	3,234		Q2 2018 CCG Operating Income

$	6,809		YTD 2019 CCG Operating Income
300			Higher gross margin from platform revenue
285			Lower operating expenses partially driven by lower investment in modem
130			Lower period charges from factory start-up costs, offset by reserved non-qualified platform product associated with our 10nm process technology taken in Q1 2019
110			Higher gross margin from adjacent businesses, primarily due to lack of initial production costs of modem products
(41		)	Other
$	6,025		YTD 2018 CCG Operating Income



(In Millions)
$	1,800		Q2 2019 DCG Operating Income
(465		)	Lower gross margin from platform revenue
(240		)	Higher period charges, primarily associated with the initial ramp of 10nm
(205		)	Higher DCG operating expenses
(27		)	Other
$	2,737		Q2 2018 DCG Operating Income

$	3,641		YTD 2019 DCG Operating Income
(760		)	Lower gross margin from platform revenue
(470		)	Higher period charges, primarily associated with the initial ramp of 10nm
(375		)	Higher DCG operating expenses
(93		)	Other
$	5,339		YTD 2018 DCG Operating Income



Earnings per share - diluted	$	0.92		$	1.05
Amortization of acquisition-related intangible assets	0.08			0.07
Restructuring and other charges	0.04			—
(Gains) losses from divestiture	—			(0.10		)
Ongoing mark-to-market on marketable equity securities	0.04			0.05
Tax Reform	—			(0.04		)
Income tax effect	(0.02		)	0.01
Non-GAAP earnings per share - diluted	$	1.06		$	1.04

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