Intel : Reports Full-Year Revenue of $55.4 Billion, Net Income of $11.4 Billion

Earnings Release Q4 2015 Intel Corporation‌‌‌‌‌‌‌‌‌‌

2200 Mission College Blvd. Santa Clara, CA 95054-1549

News Release

Intel Reports Full-Year Revenue of $55.4 Billion, Net Income of $11.4 Billion

Reports Record Quarterly Revenue of $14.9 Billion

News Highlights:

• Record full-year revenue in the Data Center, Internet of Things (IoT) and Non-Volatile Memory Solutions Groups; and record quarterly revenue in the Data Center and IoT Groups

• As of November, 14nm products made up more than 50 percent of Client Computing Group volume with growing enthusiasm for 6th Generation Intel® Core™ ("Skylake") processors

• Announced increase in cash dividend to $1.04-per-share on an annual basis

• Altera acquisition closed early in the first quarter of 2016, broadening Intel's portfolio

  
  

  SANTA CLARA, Calif., January 14, 2016 -- Intel Corporation today reported full-year revenue of $55.4 billion, operating income of $14.0 billion, net income of $11.4 billion and EPS of $2.33. The company generated approximately $19.0 billion in cash from operations, paid dividends of $4.6 billion and used

  $3.0 billion to repurchase 96 million shares of stock.

  
  

  For the fourth quarter, Intel posted revenue of $14.9 billion, operating income of $4.3 billion, net income of $3.6 billion and EPS of 74 cents. The company generated approximately $5.4 billion in cash from operations, paid dividends of $1.1 billion, and used $525 million to repurchase 17 million shares of stock.

  
  

  "Our results for the fourth quarter marked a strong finish to the year and were consistent with expectations," said Brian Krzanich, Intel CEO. "Our 2015 results demonstrate that Intel is evolving and our strategy is working. This year, we'll continue to drive growth by powering the infrastructure for an increasingly smart and connected world."

  
  

  Full-Year 2015 Business Unit Trends

• Client Computing Group revenue of $32.2 billion, down 8 percent from 2014.

• Data Center Group revenue of $16.0 billion, up 11 percent from 2014.

• Internet of Things Group revenue of $2.3 billion, up 7 percent from 2014.

• Software and services operating segments revenue of $2.2 billion, down 2 percent from 2014.

• Non-Volatile Memory Solution Group revenue up 21 percent from 2014.

  Q4 Business Unit Trends

• Client Computing Group revenue of $8.8 billion, up 3 percent sequentially and down 1 percent year-over-year.

• Data Center Group revenue of $4.3 billion, up 4 percent sequentially and up 5 percent year-over- year.

• Internet of Things Group revenue of $625 million, up 8 percent sequentially and up 6 percent year- over-year.

• Software and services operating segments revenue of $543 million, down 2 percent sequentially and down 3 percent year-over-year.

• Non-Volatile Memory Solution Group revenue was flat sequentially and up 10 percent year-over- year.

  
  

  
  

  Financial Comparison
  Annual
  2015	2014	vs. 2014
  Revenue	$55.4 billion	$55.9 billion	down 1%
  Gross Margin	62.6%	63.7%	down 1.1 points
  R&D and MG&A	$20.1 billion	$19.7 billion	up 2%
  Operating Income	$14.0 billion	$15.3 billion	down 9%
  Tax Rate	19.6%	25.9%	down 6.3 points
  Net Income	$11.4 billion	$11.7 billion	down 2%
  Earnings Per Share	$2.33	$2.31	up 1%

  
  

  Financial Comparison
  Quarterly Year-Over-Year
  Q4 2015	Q4 2014	vs. Q4 2014
  Revenue	$14.9 billion	$14.7 billion	up 1%
  Gross Margin	64.3%	65.4%	down 1.1 points
  R&D and MG&A	$5.2 billion	$5.0 billion	up 4%
  Operating Income	$4.3 billion	$4.5 billion	down 3%
  Tax Rate	16.0%	21.4%	down 5.4 points
  Net Income	$3.6 billion	$3.7 billion	down 1%
  Earnings Per Share	74 cents	74 cents	flat

  
  

  Financial Comparison
  Quarterly Sequential
  Q4 2015	Q3 2015	vs. Q3 2015
  Revenue	$14.9 billion	$14.5 billion	up 3%
  Gross Margin	64.3%	63.0%	up 1.3 points
  R&D and MG&A	$5.2 billion	$4.8 billion	up 8%
  Operating Income	$4.3 billion	$4.2 billion	up 3%
  Tax Rate	16.0%	26.9%	down 10.9 points
  Net Income	$3.6 billion	$3.1 billion	up 16%
  Earnings Per Share	74 cents	64 cents	up 16%

  Business Outlook

  Intel's Business Outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments and other significant transactions that may be completed after January 14.

  
  

  Please note: Our Full-Year 2016 and Q1 2016 Business Outlook includes the expected results of our recently completed acquisition of Altera, an additional week in the first quarter due to 2016 being a 53- week year and a change in the estimated useful lives for our machinery and equipment in our factories from four to five years.

  
  

  The acquisition of Altera was completed in early fiscal year 2016, which means that the 2016 guidance includes the expected results for the FPGA business. As a result of the Altera acquisition, we have acquisition-related charges that are primarily non-cash. Our guidance for the first quarter and full-year 2016 include both GAAP and non-GAAP estimates. Reconciliations between these GAAP and non-GAAP financial measures are included below.

  
  

  $0 $0 ^ approximately

  Full-Year 2016	GAAP	Non-GAAP	Range
  Revenue	Mid to high single digits	Mid to high single digits	n/a
  Gross margin percentage	61%	63%	+/- a couple pct. pts.
  R&D plus MG&A spending	$21.4 billion	$21.3 billion	+/- 400 million
  Amortization of acquisition-related intangibles included in operating expenses	$350 million	$0	approximately
  Depreciation	$6.5 billion	$6.5 billion ^	+/- 200 million
  Tax rate	25%	25% ^	approximately
  Full-year capital spending	$9.5 billion	$9.5 billion ^	+/- 500 million
  Q1 2016	GAAP	Non-GAAP	Range
  Revenue	$14.0 billion	$14.1 billion	+/- 500 million
  Gross margin percentage	58%	62%	+/- a couple pct. pts.
  R&D plus MG&A spending	$5.6 billion	$5.5 billion	approximately
  Amortization of acquisition-related

  intangibles included in operating expenses $100 million $0 approximately Impact of equity investments and interest

  and other, net

  Depreciation $1.7 billion $1.7 billion ^ approximately

  
  

  For additional information regarding Intel's results and Business Outlook, please see the CFO commentary at: www.intc.com/results.cfm.

  
  

  Status of Business Outlook

  Intel's Business Outlook is posted on intc.com and may be reiterated in public or private meetings with investors and others. The Business Outlook will be effective through the close of business on

  March 18 unless earlier updated; except that the Business Outlook for amortization of acquisition-related intangibles, impact of equity investments and interest and other, restructuring charges, and tax rate, will be effective only through the close of business on January 21. Intel's Quiet Period will start from the close of business on March 18 until publication of the company's first-quarter earnings release, scheduled for April 19. During the Quiet Period, all of the Business Outlook and other forward-looking statements disclosed in the company's news releases and filings with the SEC should be considered as historical, speaking as of prior to the Quiet Period only and not subject to an update by the company.

  ^ No adjustment on a non-GAAP basis.

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  Risk Factors

  The above statements and any others in this release that refer to future plans and expectations are forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipates," "expects," "intends," "goals," "plans," "believes," "seeks," "estimates," "continues," "may," "will," "should," and variations of such words and similar expressions are intended to identify such forward- looking statements. Statements that refer to or are based on projections, uncertain events or assumptions also identify forward-looking statements. Many factors could affect Intel's actual results, and variances from Intel's current expectations regarding such factors could cause actual results to differ materially from those expressed in these forward-looking statements. Intel presently considers the following to be important factors that could cause actual results to differ materially from the company's expectations.

  
  

• Demand for Intel's products is highly variable and could differ from expectations due to factors including changes in business and economic conditions; consumer confidence or income levels; the introduction, availability and market acceptance of Intel's products, products used together with Intel products and competitors' products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers.

  
  

• Intel's gross margin percentage could 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; and product manufacturing quality/yields. Variations in gross margin may also be caused by the timing of Intel product introductions and related expenses, including marketing expenses, and Intel's ability to respond quickly to technological developments and to introduce new products or incorporate new features into existing products, which may result in restructuring and asset impairment charges.

  
  

• Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates. Results may also be affected by the formal or informal imposition by countries of new or revised export and/or import and doing-business regulations, which could be changed without prior notice.

  
  

• Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term.

  
  

• The amount, timing and execution of Intel's stock repurchase program could be affected by changes in Intel's priorities for the use of cash, such as operational spending, capital spending, acquisitions, and as a result of changes to Intel's cash flows or changes in tax laws.

  
  

• Intel's expected tax rate is based on current tax law and current expected income and may be affected by the jurisdictions in which profits are determined to be earned and taxed; 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.

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