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Broadcom (AVGO) Q4 Earnings and Revenues Surpass Estimates
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Broadcom (AVGO - Free Report) reported fourth-quarter fiscal 2021 non-GAAP earnings of $7.81 per share, which beat the Zacks Consensus Estimate by 0.77% and increased 23% year over year.
Net revenues of $7.41 billion, up 14.5% year over year, surpassed the Zacks Consensus Estimate by 0.7%. The year-over-year growth was driven by strong demand from hyper-cloud and service-provider customers.
Following impressive fourth-quarter results, AVGO shares jumped 6.4% in after-hour trading. Broadcom shares are up 33.3% year to date compared with 38% growth of the Zacks Electronics Semiconductors industry. The Zacks Computer & Technology sector rose 26.4% in the same time frame.
Segmental Revenues
Semiconductor solutions’ revenues (76.1% of total net revenues) totaled $5.63 billion, up 16.6% year over year. This upside can be attributed to higher demand for wireless solutions and continued momentum in networking and broadband solutions.
The company witnessed strength in the networking end market with revenues up 13% year over year to $1.9 billion and accounting for 34% of Semiconductor Solution revenues. Networking revenues were driven by strong demand for campus switchingsolution.
In the broadband end-market, revenues were up 29% year over year to $872 million and contributed 16% of Semiconductor Solution revenues. Continued strong demand for next-generation PON with Wi-Fi 6 and 6C access gateways drove results.
Revenues from the wireless vertical increased 21% year over year to $1.8 billion and contributed 32% of Semiconductor Solution revenues.
In the server storage connectivity domain, revenues were up 21% year over year to $815 million. The end market contributed 15% of Semiconductor Solution revenues. Robust demand for storage controllers and host bus adapters drove top-line growth. Broadcom benefited from renewed spending by enterprises as they upgraded their compute and storage infrastructure.
Industrial revenues of $197 million contributed 3% of Semiconductor Solution revenues. Resales were up 36% year over year, driven by aggressive buying from OEMs in automotive, robotics, factory automation and renewable energy.
Infrastructure software revenues (23.9%) increased 8.3% year over year to $1.77 billion. Brocade grew 19% year on year, driven by the launch of new-generation Gen 7 Fibre Channel SAN products.
Operating Details
Non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis to 74.6%. The improvement can be attributed to a higher revenue base.
Semiconductor solutions’ gross margin expanded 170 bps year over year to roughly 70%, driven by favorable product mix and content growth in next-generation products across the company’s product portfolio. Infrastructure software gross margin expanded 19 bps year over year to 90%.
Research & development as a percentage of net revenues declined 90 bps on a year-over-year basis to 12.4%. Selling, general and administrative expenses also declined 90 bps on a year-over-year basis to 3%.
Adjusted EBITDA increased 18.8% year over year to $4.55 billion. Adjusted EBITDA margin expanded 220 bps on a year-over-year basis to 61.4%.
Non-GAAP operating margin expanded 290 bps on a year-over-year basis to 59.2%, which can be attributed to expansion in gross margin.
Balance Sheet & Cash Flow
As of Oct 31, 2021, cash & cash equivalents were $12.163 billion compared with $11.105 billion reported as of Aug 1, 2021.
Total debt (including current portion of $290 million) was $39.730 billion as of Oct 31, 2021 compared with $40.457 billion as of Aug 1, 2021.
Broadcom generated cash flow from operations of $3.541 billion unchanged sequentially. Free cash flow during the quarter was $3.453 billion compared with $3.426 billion in the prior quarter.
During the reported quarter, Broadcom returned $1.486 billion in dividends to shareholders during the fiscal fourth quarter.
Broadcom raised the quarterly dividend by 14% to $4.10 per share for fiscal 2022 and announced a new $10 billion share repurchase program.
Guidance
For first-quarter fiscal 2022, Broadcom anticipates revenues of $7.6 billion. The Zacks Consensus Estimate is pegged at $7.18 billion, indicating growth of 7.8% from the figure reported in the year-ago quarter.
Adjusted EBITDA is expected to be approximately 61.5% of projected revenues in the fiscal first quarter.
Semiconductor Solutions revenues are expected to grow double-digits (28%) year over year and low single digits sequentially.
Broadcom expects networking revenue growth to be close to 30% year over year in the first quarter. Server storage connectivity revenues are expected to grow roughly 30% year over year.
Broadband revenues are expected to increase at double-digit percentage on a year-over-year basis.
Wireless revenues are expected to increase at a single-digit rate sequentially. On a year-over-year basis, revenues are expected to be flat to up low single-digit percentage.
ARW shares have returned 29.1% year to date compared with the Zacks Electronics-Parts Distribution industry’s growth of 33.5% and the Computer & Technology sector’s return of 26.3%.
Salesforce, another Zacks Rank #1 stock, has a long-term earnings growth rate of 16.75%.
CRM is up 18.8% against the Zacks Computer Software industry’s growth of 39.5% and Computer & Technology sector’s return of 26.4% year to date.
The long-term earnings growth rate for Alphabet, another Zacks Rank #1 stock, is currently pegged at 25.82%.
Alphabet shares have surged 68.4% year to date compared with the Internet-Services industry’s growth of 43.1% and the Computer & Technology sector’s return of 26.4%.
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Broadcom (AVGO) Q4 Earnings and Revenues Surpass Estimates
Broadcom (AVGO - Free Report) reported fourth-quarter fiscal 2021 non-GAAP earnings of $7.81 per share, which beat the Zacks Consensus Estimate by 0.77% and increased 23% year over year.
Net revenues of $7.41 billion, up 14.5% year over year, surpassed the Zacks Consensus Estimate by 0.7%. The year-over-year growth was driven by strong demand from hyper-cloud and service-provider customers.
Following impressive fourth-quarter results, AVGO shares jumped 6.4% in after-hour trading. Broadcom shares are up 33.3% year to date compared with 38% growth of the Zacks Electronics Semiconductors industry. The Zacks Computer & Technology sector rose 26.4% in the same time frame.
Segmental Revenues
Semiconductor solutions’ revenues (76.1% of total net revenues) totaled $5.63 billion, up 16.6% year over year. This upside can be attributed to higher demand for wireless solutions and continued momentum in networking and broadband solutions.
Broadcom Inc. Price, Consensus and EPS Surprise
Broadcom Inc. price-consensus-eps-surprise-chart | Broadcom Inc. Quote
The company witnessed strength in the networking end market with revenues up 13% year over year to $1.9 billion and accounting for 34% of Semiconductor Solution revenues. Networking revenues were driven by strong demand for campus switchingsolution.
In the broadband end-market, revenues were up 29% year over year to $872 million and contributed 16% of Semiconductor Solution revenues. Continued strong demand for next-generation PON with Wi-Fi 6 and 6C access gateways drove results.
Revenues from the wireless vertical increased 21% year over year to $1.8 billion and contributed 32% of Semiconductor Solution revenues.
In the server storage connectivity domain, revenues were up 21% year over year to $815 million. The end market contributed 15% of Semiconductor Solution revenues. Robust demand for storage controllers and host bus adapters drove top-line growth. Broadcom benefited from renewed spending by enterprises as they upgraded their compute and storage infrastructure.
Industrial revenues of $197 million contributed 3% of Semiconductor Solution revenues. Resales were up 36% year over year, driven by aggressive buying from OEMs in automotive, robotics, factory automation and renewable energy.
Infrastructure software revenues (23.9%) increased 8.3% year over year to $1.77 billion. Brocade grew 19% year on year, driven by the launch of new-generation Gen 7 Fibre Channel SAN products.
Operating Details
Non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis to 74.6%. The improvement can be attributed to a higher revenue base.
Semiconductor solutions’ gross margin expanded 170 bps year over year to roughly 70%, driven by favorable product mix and content growth in next-generation products across the company’s product portfolio. Infrastructure software gross margin expanded 19 bps year over year to 90%.
Research & development as a percentage of net revenues declined 90 bps on a year-over-year basis to 12.4%. Selling, general and administrative expenses also declined 90 bps on a year-over-year basis to 3%.
Adjusted EBITDA increased 18.8% year over year to $4.55 billion. Adjusted EBITDA margin expanded 220 bps on a year-over-year basis to 61.4%.
Non-GAAP operating margin expanded 290 bps on a year-over-year basis to 59.2%, which can be attributed to expansion in gross margin.
Balance Sheet & Cash Flow
As of Oct 31, 2021, cash & cash equivalents were $12.163 billion compared with $11.105 billion reported as of Aug 1, 2021.
Total debt (including current portion of $290 million) was $39.730 billion as of Oct 31, 2021 compared with $40.457 billion as of Aug 1, 2021.
Broadcom generated cash flow from operations of $3.541 billion unchanged sequentially. Free cash flow during the quarter was $3.453 billion compared with $3.426 billion in the prior quarter.
During the reported quarter, Broadcom returned $1.486 billion in dividends to shareholders during the fiscal fourth quarter.
Broadcom raised the quarterly dividend by 14% to $4.10 per share for fiscal 2022 and announced a new $10 billion share repurchase program.
Guidance
For first-quarter fiscal 2022, Broadcom anticipates revenues of $7.6 billion. The Zacks Consensus Estimate is pegged at $7.18 billion, indicating growth of 7.8% from the figure reported in the year-ago quarter.
Adjusted EBITDA is expected to be approximately 61.5% of projected revenues in the fiscal first quarter.
Semiconductor Solutions revenues are expected to grow double-digits (28%) year over year and low single digits sequentially.
Broadcom expects networking revenue growth to be close to 30% year over year in the first quarter. Server storage connectivity revenues are expected to grow roughly 30% year over year.
Broadband revenues are expected to increase at double-digit percentage on a year-over-year basis.
Wireless revenues are expected to increase at a single-digit rate sequentially. On a year-over-year basis, revenues are expected to be flat to up low single-digit percentage.
Zacks Rank & Stocks to Consider
Broadcom currently has a Zacks Rank #2 (Buy).
Some better-ranked stocks in the Computer & Technology sector are Arrow Electronics (ARW - Free Report) , Salesforce (CRM - Free Report) and Alphabet (GOOGL - Free Report) .
Currently, Arrow Electronics sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The long-term earnings growth rate is pegged at 27.36%.
ARW shares have returned 29.1% year to date compared with the Zacks Electronics-Parts Distribution industry’s growth of 33.5% and the Computer & Technology sector’s return of 26.3%.
Salesforce, another Zacks Rank #1 stock, has a long-term earnings growth rate of 16.75%.
CRM is up 18.8% against the Zacks Computer Software industry’s growth of 39.5% and Computer & Technology sector’s return of 26.4% year to date.
The long-term earnings growth rate for Alphabet, another Zacks Rank #1 stock, is currently pegged at 25.82%.
Alphabet shares have surged 68.4% year to date compared with the Internet-Services industry’s growth of 43.1% and the Computer & Technology sector’s return of 26.4%.