Intel details plans to lead in traditional
markets, disrupt high-growth emerging markets.
Intel today hosted its 2022 Investor Meeting and outlined key
elements of the company’s strategy and path to long-term growth
during an era of unprecedented demand for semiconductors. The event
included a series of announcements at both a corporate and
individual business unit level, including more details of the
company’s Smart Capital strategy, product roadmaps across its new
reporting segments and key execution milestones.
More: Intel Investor Meeting 2022 (Press Kit) | Intel
Technology Roadmaps and Milestones (Fact Sheet) | Intel Investor
Meeting 2022 Keynote (Livestream/Replay) | Intel Reveals Bold
Multiyear Xeon Roadmap to Accelerate Data Center Leadership and
Growth | Building a High-Performance and Efficient Future for Our
Data Center Customers (Lisa Spelman Editorial)
“The continued proliferation of technology is driving sustained,
long-term demand for semiconductors, creating a $1 trillion market
opportunity by 2030,” said Pat Gelsinger, Intel chief executive
officer. “With that opportunity in mind, today we outlined our
strategy and roadmap for accelerating to 10%-12% year-over-year
revenue growth by 2026 by doubling down on innovation, driving even
deeper collaboration with our customers and partners, and
leveraging our core strengths to successfully grow traditional
markets and disrupt new ones. Our goals are ambitious, but I’m
confident we have the right strategy and right team to achieve them
and to deliver long-term value for our shareholders.”
Full-Year 2022 Outlook
At today’s event, Intel provided its outlook for the full-year
2022. For 2022, Intel expects revenue of $76 billion; non-GAAP
gross margin of 52%; non-GAAP EPS of $3.50; and net capital
expenditures of approximately $27 billion. Adjusted free cash flow
is expected to be negative $1 billion to $2 billion as the company
ramps its investments to accelerate long-term growth.
The company’s guidance includes both GAAP and non-GAAP
estimates. Full reconciliations between these GAAP and non-GAAP
measures are included below.
Full-Year 2022
GAAP
Non-GAAP
Revenue
$76.0 billion
$76.0 billion^
Gross margin
49.6%
52%
Earnings per share
$3.55
$3.50
Net capital spending1
$27.0 billion
$27.0 billion^
Adjusted free cash flow
N/A
($1-2 billion)
Long-Term Profitable Growth
Longer term, Intel expects year-over-year revenue growth moving
to the mid- to high-single digits in 2023 and 2024, with
year-over-year growth ramping to 10%-12% by 2026.
“We expect to deliver the growth targets outlined today through
our reinvigorated focus on large and growing markets, investments
in our technology roadmap, and disciplined fiscal approach,” said
David Zinsner, Intel chief financial officer. “At the same time, we
will combine financial discipline with a steady focus on revenue
growth, gross margin expansion and strong cash flow. This approach
gives us confidence in our ability to execute our plan and deliver
compelling shareholder returns.”
As Intel’s investments begin to deliver faster growth, gross
margins are expected to expand from the 51%-53% range over the next
three years to 54%-58% in 2025 and 2026. In addition to faster
revenue growth, the company sees several opportunities to expand
gross margin by 2025. These include executing the company’s
investments to deliver five nodes in four years to regain
technology leadership, better sales mix of leadership products and
scaling of higher-growth emerging businesses. Intel also intends to
maintain strong cost discipline to identify further cost
efficiencies to drive gross margin expansion and deliver leadership
products with best-in-class cost.
Investment Phase Model
2023-2024
Non-GAAP
Revenue growth YoY
Mid-to-High single digits^
Gross margin
51-53%
Operating expense2
28-30%
Net capital intensity3
~35%
Adjusted free cash flow2
~neutral
Long-Term Model 2025-2026
Non-GAAP
Revenue growth YoY
10-12%^
Gross margin
54-58%
Operating expense2
25-27%
Net capital intensity3
~25%
Adjusted free cash flow2
~20%
Intel’s Smart Capital Strategy
Underpinning Intel’s long-term growth plan is its Smart Capital
strategy, which aims to help fund growth while creating flexibility
and delivering higher returns on investments. Under the Smart
Capital strategy, Intel intends to employ a disciplined approach to
its investments and leverage government incentives, customer
participation and other creative partnerships as offsets to capital
spending. This will allow the company to adjust quickly to
opportunities in the market and gain share while managing its
margin structure and capital spending. Key elements of Smart
Capital include:
- Smart Capacity Investments: Intel is aggressively
building out “shells,” which are the smaller portion of the overall
cost of a fab but have the longest lead time. Having available
shell space gives the company flexibility in how and when it brings
additional capacity online based on milestone triggers such as
product readiness, market conditions and customer commitments.
- Government Incentives: Intel is continuing to partner
with governments in the U.S. and Europe to advance incentives for
domestic manufacturing capacity for leading-edge semiconductors, as
it builds advanced fabs that secure domestic supply and provide
opportunities for bolstering economic growth in local
communities.
- Customer Commitments: Intel Foundry Services is working
closely with potential customers, and some have indicated
willingness to make advance payments to secure capacity. This
provides Intel with the advantage of committed volume, de-risking
investments while providing capacity corridors for our foundry
customers.
- Infrastructure Agreements: Intel is also exploring
innovative ways to optimize its investments in new fab projects.
Today Intel announced a memorandum of understanding (MOU) with
Brookfield Asset Management (Brookfield), one of the largest global
investors in real assets, whereby Intel and Brookfield will explore
project finance options to help fund new Intel manufacturing sites
and certain related renewable power opportunities. This would
increase Intel capital flexibility and help accelerate Intel’s
manufacturing build-out. This is a creative, first-of-a-kind model
for the industry that will allow Intel to fully leverage a premier
financial institution to scale its capacity in a capital-efficient
manner. The agreement also shows how government incentives can help
to increase private capital for semiconductor manufacturing
expansion.
- External Foundries: Finally, Intel intends to make
effective use of external foundries, leveraging some of their
unique capabilities to help deliver leadership products.
Together, Intel’s Smart Capital actions provide flexibility,
reduce its overall gross capital needs and act as a tailwind to
gross margin.
Plans to Lead in Traditional Markets and Disrupt High-Growth
Emerging Markets
Intel today provided substantial updates across its six distinct
but complementary business units that enable the company to capture
growth in both its large traditional markets and high-growth
emerging markets. This includes planned growth in the client, data
center, network and edge markets based on increasingly competitive
roadmaps, and the ability to disrupt important emerging markets
with focused investments in accelerated compute and graphics,
foundry, mobility and auto. In the auto market, the company remains
on track to take Mobileye public in the U.S. in mid-2022 via an
initial public offering, where Intel will remain the majority owner
of Mobileye. This structure gives Intel multiple engines for growth
and an inherent flexibility in how it invests. Intel’s new
reporting segments, which will be presented beginning with its
first-quarter 2022 results, will also provide shareholders with
more transparency, giving them direct visibility into the company’s
progress in each area.
More information about these updates can be found in the Intel
Investor Meeting press kit on intel.com, including:
- A fact sheet on Intel’s six business units and recent
momentum
- A news release on Intel’s Xeon roadmap
- A series of papers authored by Intel leadership on topics
including the state of the semiconductor industry, the future of
Moore’s Law, and Intel’s software, edge and AI strategies
A replay of the livestream of the mainstage sessions at Intel’s
2022 Investor Meeting can be found on the Intel Investor Meeting
press kit, along with recordings of the morning business sessions
and copies of all of the presentations.
About Intel
Intel (Nasdaq: INTC) is an industry leader, creating
world-changing technology that enables global progress and enriches
lives. Inspired by Moore’s Law, we continuously work to advance the
design and manufacturing of semiconductors to help address our
customers’ greatest challenges. By embedding intelligence in the
cloud, network, edge and every kind of computing device, we unleash
the potential of data to transform business and society for the
better. To learn more about Intel’s innovations, go to
newsroom.intel.com and intel.com.
^ No adjustment on a non-GAAP basis 1 Net capital spending
reflects capital expenditures, less proceeds from capital grants
received 2 Measured as a percentage of revenue 3 Net capital
intensity reflects capital expenditures, less proceeds from capital
grants received, measured as a percentage of revenue
Forward-Looking
Statements
Statements in this release that refer to outlook, plans, and
expectations are forward-looking statements that involve a number
of risks and uncertainties. Words such as "anticipates," "expects,"
"intends," "goals," "plans," "guide," "believes," "seeks,"
"estimates," "continues," "committed," "on-track," "ramp,"
"momentum," "roadmap," "schedule," "potential," "next gen," "may,"
"will," "would," "should," "could," "accelerate," "cadence,"
"deliver," "path," "progress," "forecast," “likely,” "future,"
"strategy," "pipeline," and "positioned," and variations of such
words and similar expressions are intended to identify such
forward-looking statements. Statements that refer to or are based
on estimates, forecasts, projections, uncertain events or
assumptions, including statements relating to Intel's strategy and
its anticipated benefits; Intel’s process and packaging technology
roadmap and schedules; innovation cadence; manufacturing expansion,
financing and investment plans, including Intel's planned Ohio
investments; the benefits of the memorandum of understanding with
Brookfield; the timing and conditions of such transactions; pending
or future transactions; the proposed Mobileye initial public
offering (IPO); total addressable market (TAM) and market
opportunity; supply expectations, including regarding industry
shortages; business plans; financial projections and expectations;
future economic conditions; future legislation; future impacts of
the COVID-19 pandemic; future technology, services, and products
and the expected benefits and availability of such technologies,
services, and products, including PowerVia and RibbonEFT
technologies, future process nodes, and other technologies and
products; product and manufacturing plans, goals, timelines, ramps,
progress, and future product and process leadership and
performance; future capital offsets; future use of EUV and other
manufacturing tools and technologies; product and manufacturing and
design goals and progress; internal manufacturing volumes; future
external foundry business; future manufacturing capacity; plans and
goals related to Intel’s foundry business; investment returns and
benefits; government incentives; benefits related to Intel’s
foundry business; foundry service offerings, including intellectual
property offerings; market opportunity; expectations regarding
customers, including designs, wins, orders, and partnerships;
projections regarding competitors; ESG goals; and anticipated
trends in our businesses or the markets relevant to them, including
with respect to future demand, market share, technology trends, and
industry growth, also identify forward-looking statements. All
forward-looking statements included in this release are based on
management's expectations as of the date of this release and,
except as required by law, Intel disclaims any obligation to update
these forward-looking statements to reflect future events or
circumstances. Forward-looking statements involve many risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied in such statements. Intel presently
considers the following to be among the important factors that can
cause actual results to differ materially from the company's
expectations.
- Demand for Intel's products is highly variable and can differ
from expectations due to factors including changes in business and
economic conditions; customer confidence or income levels, and the
levels of customer capital spending; the introduction,
availability, and market acceptance of Intel's products, products
used together with Intel products, and competitors' products;
competitive and pricing pressures, including actions taken by
competitors; supply constraints and other disruptions affecting
customers; changes in customer order patterns and order
cancellations; changes in customer needs and emerging technology
trends; and changes in the level of inventory and computing
capacity at customers.
- Intel's results can vary significantly from expectations based
on capacity utilization; variations in inventory valuation,
including variations related to the timing of qualifying products
for sale; changes in revenue levels; segment product mix; the
timing and execution of the manufacturing ramp and associated
costs; excess or obsolete inventory; changes in unit costs; defects
or disruptions in the supply of materials or resources, including
as a result of ongoing industry shortages of components and
substrates; product manufacturing quality/yields; and changes in
capital requirements and investment plans. Variations in results
can also be caused by the timing of Intel product introductions and
related expenses, including marketing programs, and Intel's ability
to respond quickly to technological developments and to introduce
new products or incorporate new features into existing products, as
well as decisions to exit product lines or businesses, which can
result in restructuring and asset impairment charges.
- Intel's results can be affected by adverse economic, social,
political, regulatory, and physical/infrastructure conditions in
countries where Intel, its customers or its suppliers operate,
including recession or slowing growth, military conflict and other
security risks, natural disasters, infrastructure disruptions,
health concerns (including the COVID-19 pandemic), inflation,
fluctuations in currency exchange rates, sanctions and tariffs,
political disputes, changes in government grants and incentives,
and continuing uncertainty regarding social, political,
immigration, and tax and trade policies in the U.S. and abroad.
Results can also be affected by the formal or informal imposition
by countries of new or revised export and/or import and
doing-business regulations, including changes or uncertainty
related to the U.S. government entity list and changes in the
ability to obtain export licenses, which can be changed without
prior notice.
- The COVID-19 pandemic has previously adversely affected
significant portions of Intel's business and could have a material
adverse effect on Intel's financial condition and results of
operations. The pandemic has resulted in authorities imposing
numerous measures to try to contain the virus, including vaccine
requirements. These measures have impacted and may further impact
our workforce and operations, the operations of our customers, and
those of our respective suppliers and partners. Restrictions on our
manufacturing or support operations or workforce, similar
limitations for our suppliers, and transportation restrictions or
disruptions can impact our ability to meet customer demand and
could have a material adverse effect on us. Disruptions in our
customers’ operations and supply chains may adversely affect our
results of operations. The pandemic has caused us to modify our
business practices. There is no certainty that such measures will
be sufficient to mitigate the risks posed by the virus, and illness
and workforce disruptions could lead to unavailability of our key
personnel and harm our ability to perform critical functions. The
pandemic has significantly increased economic and demand
uncertainty. Demand for our products could be materially harmed in
the future. The pandemic could lead to increased disruption and
volatility in capital markets and credit markets, which could
adversely affect our liquidity and capital resources. The degree to
which COVID-19 impacts our results will depend on future
developments, which are highly uncertain. The impact of the
pandemic can also exacerbate other risks discussed in this
section.
- Intel operates in highly competitive industries and its
operations have high costs that are either fixed or difficult to
reduce in the short term. In addition, we have entered new areas
and introduced adjacent products, such as our intention to become a
major provider of foundry services, and we face new sources of
competition and uncertain market demand or acceptance of our
offerings with respect to these new areas and products, and they do
not always grow as projected.
- Intel's expected tax rate is based on current tax law,
including current interpretations of the Tax Cuts and Jobs Act of
2017 (TCJA), and current expected income and can be affected by
changes in interpretations of TCJA and other laws; changes in the
volume and mix of profits earned and location of assets across
jurisdictions with varying tax rates; changes in the estimates of
credits, benefits, and deductions; the resolution of issues arising
from tax audits with various tax authorities, including payment of
interest and penalties; and the ability to realize deferred tax
assets.
- Intel's results can be affected by gains or losses from equity
securities and interest and other, which can vary depending on
gains or losses on the change in fair value, sale, exchange, or
impairments of equity and debt investments, interest rates, cash
balances, and changes in fair value of derivative instruments.
- Product defects or errata (deviations from published
specifications) can adversely impact our expenses, revenues, and
reputation.
- We or third parties regularly identify security vulnerabilities
with respect to our processors and other products as well as the
operating systems and workloads running on them. Security
vulnerabilities and any limitations of, or adverse effects
resulting from, mitigation techniques can adversely affect our
results of operations, financial condition, customer relationships,
prospects, and reputation in a number of ways, any of which may be
material, including incurring significant costs related to
developing and deploying updates and mitigations, writing down
inventory value, a reduction in the competitiveness of our
products, defending against product claims and litigation,
responding to regulatory inquiries or actions, paying damages,
addressing customer satisfaction considerations, or taking other
remedial steps with respect to third parties. Adverse publicity
about security vulnerabilities or mitigations could damage our
reputation with customers or users and reduce demand for our
products and services.
- Cybersecurity incidents, whether or not successful, can affect
Intel's results by causing us to incur significant costs or
disrupting our operations or those of our customers and suppliers,
and can result in reputational harm.
- Intel's results can be affected by litigation or regulatory
matters involving intellectual property, stockholder, consumer,
antitrust, commercial, disclosure, and other issues, as well as by
the impact and timing of settlements and dispute resolutions. For
example, in the first quarter of 2021, Intel accrued a $2.2 billion
charge related to litigation involving VLSI Technology LLC (VLSI).
An unfavorable ruling can include monetary damages or an injunction
prohibiting us from manufacturing or selling one or more products,
precluding particular business practices, impacting our ability to
design products, or requiring other remedies such as compulsory
licensing of intellectual property.
- Intel's results can be affected by the impact and timing of
closing of acquisitions, divestitures, and other significant
transactions. In addition, these transactions do not always achieve
our financial or strategic objectives and can disrupt our ongoing
business and adversely impact our results of operations. The
memorandum of understanding between Intel and Brookfield is
preliminary and non-binding; the parties may not agree on final
terms, and the closing of any transactions involving Brookfield may
be delayed or may not occur. The expected financial or other
benefits of any transaction between the parties may not be
realized. The proposed Mobileye IPO may not be completed in our
expected timeframe, or at all, due to factors that include adverse
changes in economic or market conditions or in our business; delays
in regulatory, stock exchange, or other approvals; loss of key
employees, and changes in our business strategy.
- The amount, timing, and execution of Intel's stock repurchase
program fluctuate based on Intel's priorities for the use of cash
for other purposes—such as investing in our business, including
operational and capital spending, acquisitions, and returning cash
to our stockholders as dividend payments.
Detailed information regarding these and other factors that
could affect Intel's business and results is included in Intel's
SEC filings, including the company's most recent reports on Forms
10-K and 10-Q, particularly the "Risk Factors" sections of those
reports. Copies of these filings may be obtained by visiting our
Investor Relations website at www.intc.com or the SEC's website at
www.sec.gov.
© Intel Corporation. Intel, the Intel logo and other Intel marks
are trademarks of Intel Corporation or its subsidiaries. Other
names and brands may be claimed as the property of others.
Intel Corporation
Explanation of Non-GAAP Measures
In addition to disclosing the 2022 financial outlook in
accordance with US GAAP, this document contains references to the
non-GAAP financial measures below. We believe these non-GAAP
financial measures provide investors with useful supplemental
information about our operating performance, enable comparison of
financial trends and results between periods where certain items
may vary independent of business performance, and allow for greater
transparency with respect to key metrics used by management in
operating our business and measuring our performance. Certain of
these non-GAAP financial measures are used in our performance-based
RSUs and our annual cash bonus plan.
Certain 2022 figures and long-term outlook ranges are provided
on a non-GAAP basis. We are unable to provide a full reconciliation
of these measures to the corresponding GAAP measures without
unreasonable efforts, as the amount and timing of related
adjustments on a long-term basis are subject to considerable
uncertainty, depend on various factors, and could be material to
our results computed in accordance with GAAP. We believe such a
reconciliation would also imply a degree of precision that is
inappropriate for these forward-looking measures.
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 US
GAAP, and the financial outlooks calculated in accordance with US
GAAP and reconciliations from these outlooks 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 US 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 core operating performance.
These adjustments facilitate a useful evaluation of our core
operating performance and comparisons to past operating results and
provide investors with additional means to evaluate expense
trends.
Share-based compensation
Share-based compensation consists of
charges related to our employee equity incentive plans.
We exclude charges related to share-based
compensation for purposes of calculating certain non-GAAP measures
because we believe these adjustments provide better comparability
to peer company results and because these charges are not viewed by
management as part of our core operating performance. We believe
these adjustments provide investors with a useful view, through the
eyes of management, of the company’s core business model, how
management currently evaluates core operational performance, and
additional means to evaluate expense trends, including in
comparison to other peer companies.
(Gains) losses from divestiture
Gains or losses are recognized at the
close of a divestiture, or over a specified deferral period when
deferred consideration is received at the time of closing. Based on
our ongoing obligation under the NAND wafer manufacturing and sale
agreement entered into in connection with the first closing of the
sale of our NAND memory business on December 29, 2021, a portion of
the initial closing consideration will be deferred and recognized
between first and second closing.
We exclude gains or losses resulting from
divestitures for purposes of calculating certain non-GAAP measures
because they do not reflect our current operating performance.
These adjustments facilitate a useful evaluation of our current
operating performance and comparisons to past operating
results.
(Gains) losses on equity investments,
net
(Gains) losses on equity investments, net
consists of ongoing mark-to-market adjustments on marketable equity
securities, observable price adjustments on non-marketable equity
securities, impairment charges, and sale of equity investments and
other.
We exclude these non-operating earnings
for better comparability between periods. The exclusion reflects
how management evaluates the core operations of the business.
Adjusted Free cash flow
We reference a non-GAAP financial measure
of adjusted free cash flow, which is used by management when
assessing our sources of liquidity, capital resources, and quality
of earnings. Adjusted free cash flow is operating cash flow
adjusted to exclude 1) additions to property, plant and equipment,
net of proceeds from capital grants received, and 2) payments on
finance leases.
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.
Intel Corporation
Supplemental Reconciliations of GAAP Outlook to Non-GAAP
Outlook
Set forth below are reconciliations of the non-GAAP financial
measure to the most directly comparable U.S. GAAP financial
measure. 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 outlook prepared in
accordance with U.S. GAAP and the reconciliations from this 2022
Full-Year Outlook should be carefully evaluated.
Please refer to "Explanation of Non-GAAP Measures" in this
document for a detailed explanation of the adjustments made to the
comparable U.S. GAAP measures, the ways management uses the
non-GAAP measures, and the reasons why management believes the
non-GAAP measures provide useful information for investors.
Full-Year 2022 Outlook
Approximately
GAAP gross margin
49.6%
Amortization of acquisition-related
intangible assets
1.7%
Share-based compensation
0.7%
Non-GAAP gross margin
52.0%
GAAP earnings per share—diluted
$3.55
Acquisition-related adjustments
0.36
Restructuring and other charges
0.01
Share-based compensation
0.81
(Gains) losses from divestiture
(0.28)
(Gains) losses on equity investments,
net
(1.23)
Income tax effects
0.289
Non-GAAP earnings per
share—diluted
$3.50
(In Billions)
Full-Year 2022 Outlook
GAAP cash from operations
$26.8
Net additions to property, plant, and
equipment
(27.0)
Payments on finance leases
(1.3)
Adjusted free cash flow
$(1.5)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220217005911/en/
Tim Blankenship Investor Relations 1-480-554-9007
timothy.blankenship@intel.com
Penny Bruce Media Relations 1-408-893-0601
penelope.bruce@intel.com
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