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Broadcom (AVGO) Q1 Earnings and Revenues Surpass Estimates
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Broadcom (AVGO - Free Report) reported first-quarter fiscal 2022 non-GAAP earnings of $8.39 per share, which beat the Zacks Consensus Estimate by 2.82% and improved 27% year over year.
Net revenues increased 16% year over year to $7.7 billion, which surpassed the Zacks Consensus Estimate by 1.28%. The year-over-year growth was driven by strong demand from hyper-cloud and service-provider customers.
Broadcom shares are down 13.1% year to date compared with the Zacks Electronics Semiconductors industry’s decline of 14.7%. The Zacks Computer & Technology sector tumbled 12.7% in the same time frame.
Segmental Revenues
Semiconductor solutions’ revenues (76.2% of total net revenues) totaled $5.9 billion, up 20% year over year. This upside can be attributed to higher demand for wireless solutions and sustained momentum in networking and broadband solutions.
The company witnessed strength in the networking end market, with revenues up 33% year over year to $1.9 billion and accounted for 32% of Semiconductor Solution revenues. Networking revenues were driven by strong demand for campus switching solutions.
In the broadband end-market, revenues were up 23% year over year to $911 million and constituted 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 10% year over year to $2 billion and contributed 34% to Semiconductor Solution revenues.
In the server storage connectivity domain, revenues were up 32% year over year to $801 million. The end-market contributed 14% to Semiconductor Solution revenues. Much of the growth in this domain was driven by the continued recovery of enterprise IT spending deployed toward upgrading computer service.
Industrial revenues of $243 million contributed 4% to Semiconductor Solution revenues. Resales were up 37% year over year, driven by robust demand for electric vehicles, renewable energy, factory automation and health care.
Infrastructure software revenues (24% of net revenues) increased 5% year over year to $1.8 billion. Core software revenues were up by 6%.
Operating Details
Non-GAAP gross margin expanded 227 basis points (bps) on a year-over-year basis to 76%. The improvement can be attributed to a higher revenue base.
Semiconductor solutions’ gross margin expanded 347 bps year over year to roughly 71%, driven by favorable product mix and content growth in next-generation products across the company’s product portfolio. Infrastructure software gross margin expanded 71 bps year over year to 90%.
Research & development as a percentage of net revenues declined 110 bps on a year-over-year basis to 12.2%. Selling, general and administrative expenses declined 30 bps on a year-over-year basis to 2.9%.
Adjusted EBITDA increased 22.3% year over year to $4.8 billion. Adjusted EBITDA margin expanded 330 bps on a year-over-year basis to 62.5%.
Non-GAAP operating margin expanded 362 bps on a year-over-year basis to 62.5%, which can be attributed to expansion in gross margin.
Balance Sheet & Cash Flow
As of Jan 30, 2022, cash & cash equivalents were $10.2 billion compared with $12.2 billion reported as of Oct 31, 2021.
Total debt (including the current portion of $300 million) was $39.5 billion as of Jan 30, 2022 compared with $39.7 billion as of Oct 31, 2021.
Broadcom generated cash flow from operations of $3.486 billion in the reported quarter. Free cash flow during the quarter was $3.385 billion compared with $3.453 billion in the prior quarter.
During the reported quarter, Broadcom returned $1.8 billion in dividends to shareholders during the fiscal first quarter.
Guidance
For second-quarter fiscal 2022, Broadcom anticipates revenues of $7.9 billion.
Adjusted EBITDA is expected to be approximately 62.5% of projected revenues in the fiscal second quarter.
Zacks Rank & Other Stocks to Consider
Broadcom currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks to consider in the same sector are Blend Labs (BLND - Free Report) , Asana (ASAN - Free Report) and Allied Motion Technologies .
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Broadcom (AVGO) Q1 Earnings and Revenues Surpass Estimates
Broadcom (AVGO - Free Report) reported first-quarter fiscal 2022 non-GAAP earnings of $8.39 per share, which beat the Zacks Consensus Estimate by 2.82% and improved 27% year over year.
Net revenues increased 16% year over year to $7.7 billion, which surpassed the Zacks Consensus Estimate by 1.28%. The year-over-year growth was driven by strong demand from hyper-cloud and service-provider customers.
Broadcom shares are down 13.1% year to date compared with the Zacks Electronics Semiconductors industry’s decline of 14.7%. The Zacks Computer & Technology sector tumbled 12.7% in the same time frame.
Segmental Revenues
Semiconductor solutions’ revenues (76.2% of total net revenues) totaled $5.9 billion, up 20% year over year. This upside can be attributed to higher demand for wireless solutions and sustained momentum in networking and broadband solutions.
The company witnessed strength in the networking end market, with revenues up 33% year over year to $1.9 billion and accounted for 32% of Semiconductor Solution revenues. Networking revenues were driven by strong demand for campus switching solutions.
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In the broadband end-market, revenues were up 23% year over year to $911 million and constituted 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 10% year over year to $2 billion and contributed 34% to Semiconductor Solution revenues.
In the server storage connectivity domain, revenues were up 32% year over year to $801 million. The end-market contributed 14% to Semiconductor Solution revenues. Much of the growth in this domain was driven by the continued recovery of enterprise IT spending deployed toward upgrading computer service.
Industrial revenues of $243 million contributed 4% to Semiconductor Solution revenues. Resales were up 37% year over year, driven by robust demand for electric vehicles, renewable energy, factory automation and health care.
Infrastructure software revenues (24% of net revenues) increased 5% year over year to $1.8 billion. Core software revenues were up by 6%.
Operating Details
Non-GAAP gross margin expanded 227 basis points (bps) on a year-over-year basis to 76%. The improvement can be attributed to a higher revenue base.
Semiconductor solutions’ gross margin expanded 347 bps year over year to roughly 71%, driven by favorable product mix and content growth in next-generation products across the company’s product portfolio. Infrastructure software gross margin expanded 71 bps year over year to 90%.
Research & development as a percentage of net revenues declined 110 bps on a year-over-year basis to 12.2%. Selling, general and administrative expenses declined 30 bps on a year-over-year basis to 2.9%.
Adjusted EBITDA increased 22.3% year over year to $4.8 billion. Adjusted EBITDA margin expanded 330 bps on a year-over-year basis to 62.5%.
Non-GAAP operating margin expanded 362 bps on a year-over-year basis to 62.5%, which can be attributed to expansion in gross margin.
Balance Sheet & Cash Flow
As of Jan 30, 2022, cash & cash equivalents were $10.2 billion compared with $12.2 billion reported as of Oct 31, 2021.
Total debt (including the current portion of $300 million) was $39.5 billion as of Jan 30, 2022 compared with $39.7 billion as of Oct 31, 2021.
Broadcom generated cash flow from operations of $3.486 billion in the reported quarter. Free cash flow during the quarter was $3.385 billion compared with $3.453 billion in the prior quarter.
During the reported quarter, Broadcom returned $1.8 billion in dividends to shareholders during the fiscal first quarter.
Guidance
For second-quarter fiscal 2022, Broadcom anticipates revenues of $7.9 billion.
Adjusted EBITDA is expected to be approximately 62.5% of projected revenues in the fiscal second quarter.
Zacks Rank & Other Stocks to Consider
Broadcom currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks to consider in the same sector are Blend Labs (BLND - Free Report) , Asana (ASAN - Free Report) and Allied Motion Technologies .
Blend Labs, Allied Motion Technologies and Asana carry Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Blend Lab’s shares have tumbled 57.4% in the past year.
BLND is scheduled to report fourth-quarter 2021 results on Mar 22.
Asana’s shares have surged 58.5% in the past year.
Asana is scheduled to report fourth-quarter 2022 results on Mar 9.
Allied Motion Technologies’ shares have appreciated 11.7% in the past year.
AMOT is scheduled to report fourth-quarter 2021 results on Mar 9.