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Broadcom (AVGO) Q4 Earnings Beat Estimates, Revenues Up Y/Y
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Broadcom (AVGO - Free Report) reported fourth-quarter fiscal 2022 non-GAAP earnings of $10.45 per share, which beat the Zacks Consensus Estimate by 1.75% and improved 33.8% year over year.
Net revenues increased 20.6% year over year to $8.93 billion, which surpassed the Zacks Consensus Estimate by 0.38%.
The year-over-year growth was driven by strength in networking and server storage.
Broadcom’s shares were up 3.53% in after-hours trading.
Top-Line Details
Semiconductor solutions revenues (79.4% of total net revenues) totaled $7.09 billion, up 25.9% year over year, driven by strong adoption by hyperscalers, service providers and enterprises.
Networking revenues were $2.5 billion, up 30% year on year, representing 35% of Broadcom’s semiconductor revenues. The company witnessed strong growth from the deployment of Tomahawk 4 for data center switching at hyperscale customers.
Upgrades of edge and core routing networks with AVGO’s next-generation Jericho portfolio at cloud and service providers also benefited top-line growth.
Storage connectivity revenues were $1.2 billion, accounting for 17% of semiconductor revenues and up 50% year over year. Broadcom gained from substantial content increases at both cloud and enterprise customers due to the strong adoption of its next-generation MegaRAID and storage adapters.
Broadband revenues climbed 20% year over year to $1 billion and accounted for 15% of semiconductor revenues. The business is benefiting from ongoing multiyear deployments by North American and European service providers of 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E.
Wireless revenues of $2.1 billion represented 29% of semiconductor revenues with 13% year-over-year growth. Industrial resale revenues of $234 million inched up 1% year over year as softness in China mostly offset the strength in North American and European automotive end-markets.
Infrastructure software revenues (20.6% of net revenues) increased 3.7% year over year to $1.84 billion.
Core software revenues grew 5% year over year. Consolidated renewal rates average was 117% of expiring contracts despite adverse forex. In strategic accounts, the renewal rate average was 128%.
In strategic accounts, annualized bookings of $357 million included $101 million of cross-selling of Broadcom’s portfolio of products to these customers. Over 90% of the renewal value represented recurring subscriptions and maintenance.
Annual recurring revenues at the end of the fiscal fourth quarter were $5.4 billion, up 4% year over year.
Operating Details
The non-GAAP gross margin expanded 10 basis points (bps) on a year-over-year basis to 74.7%. The improvement can be attributed to a higher revenue base.
Research & development, as a percentage of net revenues, declined 190 bps on a year-over-year basis to 10.5%. SG&A expenses declined 40 bps on a year-over-year basis to 2.6%.
Adjusted EBITDA increased 25.8% year over year to $5.72 billion. The adjusted EBITDA margin expanded 270 bps on a year-over-year basis to 64.1%.
The non-GAAP operating margin expanded 240 bps on a year-over-year basis to 61.6%, which can be attributed to an expansion in the gross margin.
Balance Sheet & Cash Flow
As of Oct 30, 2022 cash & cash equivalents were $12.42 billion compared with the $9.98 billion reported as of Jul 31, 2022.
Total debt (including the current portion of $304 million) was $39.52 billion as of Oct 30, 2022.
Broadcom generated a cash flow from operations of $4.583 billion compared with $4.424 billion in the previous quarter. The free cash flow during the quarter was $4.461 billion compared with $4.308 billion in the prior quarter.
On Sep 30, 2022, the company paid a cash dividend of $4.10 per share of common stock, totaling $1.71 billion and a cash dividend of $20 per share of mandatory convertible preferred stock, totaling $75 million.
Broadcom increased its quarterly common stock cash dividend in the first quarter of fiscal 2023 to $4.60 per share, up 12% sequentially.
In fiscal 2022, Broadcom spent $15.5 billion, consisting of $7 billion in the form of cash dividends and $8.5 billion in repurchases and eliminations. Broadcom ended the year with $13 billion of authorization remaining under the current share repurchase program.
Guidance
For the first quarter of fiscal 2023, Broadcom anticipates revenues of $8.9 billion. Semiconductor revenue growth is expected to remain at approximately 20% on a year-over-year basis.
Management expects networking revenues to be strong and grow roughly 20% year over year in the fiscal first quarter. Server storage connectivity revenues are expected to grow more than 50% year over year. Broadband revenues are expected to grow roughly 30% year over year.
Broadcom expects wireless revenues to be sequentially flat to up low single digits year over year. Industrial resale is expected to continue the trend of low single-digit percent growth year over year.
Infrastructure software segment revenues are expected to be flat year over year, reflecting core software revenue growth of mid-single-digit percent year over year. This is expected to be offset by a year-over-year decline in the Brocade enterprise business revenues.
Adjusted EBITDA is expected at approximately 63% of projected revenues in the fiscal first quarter.
Zacks Rank & Stocks to Consider
Broadcom currently has a Zacks Rank #4 (Sell).
Shares of Broadcom have declined 20.1% year to date compared with the Zacks Computer & Technology sector’s decline of 33.5%.
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Broadcom (AVGO) Q4 Earnings Beat Estimates, Revenues Up Y/Y
Broadcom (AVGO - Free Report) reported fourth-quarter fiscal 2022 non-GAAP earnings of $10.45 per share, which beat the Zacks Consensus Estimate by 1.75% and improved 33.8% year over year.
Net revenues increased 20.6% year over year to $8.93 billion, which surpassed the Zacks Consensus Estimate by 0.38%.
The year-over-year growth was driven by strength in networking and server storage.
Broadcom’s shares were up 3.53% in after-hours trading.
Top-Line Details
Semiconductor solutions revenues (79.4% of total net revenues) totaled $7.09 billion, up 25.9% year over year, driven by strong adoption by hyperscalers, service providers and enterprises.
Broadcom Inc. Price, Consensus and EPS Surprise
Broadcom Inc. price-consensus-eps-surprise-chart | Broadcom Inc. Quote
Networking revenues were $2.5 billion, up 30% year on year, representing 35% of Broadcom’s semiconductor revenues. The company witnessed strong growth from the deployment of Tomahawk 4 for data center switching at hyperscale customers.
Upgrades of edge and core routing networks with AVGO’s next-generation Jericho portfolio at cloud and service providers also benefited top-line growth.
Storage connectivity revenues were $1.2 billion, accounting for 17% of semiconductor revenues and up 50% year over year. Broadcom gained from substantial content increases at both cloud and enterprise customers due to the strong adoption of its next-generation MegaRAID and storage adapters.
Broadband revenues climbed 20% year over year to $1 billion and accounted for 15% of semiconductor revenues. The business is benefiting from ongoing multiyear deployments by North American and European service providers of 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E.
Wireless revenues of $2.1 billion represented 29% of semiconductor revenues with 13% year-over-year growth. Industrial resale revenues of $234 million inched up 1% year over year as softness in China mostly offset the strength in North American and European automotive end-markets.
Infrastructure software revenues (20.6% of net revenues) increased 3.7% year over year to $1.84 billion.
Core software revenues grew 5% year over year. Consolidated renewal rates average was 117% of expiring contracts despite adverse forex. In strategic accounts, the renewal rate average was 128%.
In strategic accounts, annualized bookings of $357 million included $101 million of cross-selling of Broadcom’s portfolio of products to these customers. Over 90% of the renewal value represented recurring subscriptions and maintenance.
Annual recurring revenues at the end of the fiscal fourth quarter were $5.4 billion, up 4% year over year.
Operating Details
The non-GAAP gross margin expanded 10 basis points (bps) on a year-over-year basis to 74.7%. The improvement can be attributed to a higher revenue base.
Research & development, as a percentage of net revenues, declined 190 bps on a year-over-year basis to 10.5%. SG&A expenses declined 40 bps on a year-over-year basis to 2.6%.
Adjusted EBITDA increased 25.8% year over year to $5.72 billion. The adjusted EBITDA margin expanded 270 bps on a year-over-year basis to 64.1%.
The non-GAAP operating margin expanded 240 bps on a year-over-year basis to 61.6%, which can be attributed to an expansion in the gross margin.
Balance Sheet & Cash Flow
As of Oct 30, 2022 cash & cash equivalents were $12.42 billion compared with the $9.98 billion reported as of Jul 31, 2022.
Total debt (including the current portion of $304 million) was $39.52 billion as of Oct 30, 2022.
Broadcom generated a cash flow from operations of $4.583 billion compared with $4.424 billion in the previous quarter. The free cash flow during the quarter was $4.461 billion compared with $4.308 billion in the prior quarter.
On Sep 30, 2022, the company paid a cash dividend of $4.10 per share of common stock, totaling $1.71 billion and a cash dividend of $20 per share of mandatory convertible preferred stock, totaling $75 million.
Broadcom increased its quarterly common stock cash dividend in the first quarter of fiscal 2023 to $4.60 per share, up 12% sequentially.
In fiscal 2022, Broadcom spent $15.5 billion, consisting of $7 billion in the form of cash dividends and $8.5 billion in repurchases and eliminations. Broadcom ended the year with $13 billion of authorization remaining under the current share repurchase program.
Guidance
For the first quarter of fiscal 2023, Broadcom anticipates revenues of $8.9 billion. Semiconductor revenue growth is expected to remain at approximately 20% on a year-over-year basis.
Management expects networking revenues to be strong and grow roughly 20% year over year in the fiscal first quarter. Server storage connectivity revenues are expected to grow more than 50% year over year. Broadband revenues are expected to grow roughly 30% year over year.
Broadcom expects wireless revenues to be sequentially flat to up low single digits year over year. Industrial resale is expected to continue the trend of low single-digit percent growth year over year.
Infrastructure software segment revenues are expected to be flat year over year, reflecting core software revenue growth of mid-single-digit percent year over year. This is expected to be offset by a year-over-year decline in the Brocade enterprise business revenues.
Adjusted EBITDA is expected at approximately 63% of projected revenues in the fiscal first quarter.
Zacks Rank & Stocks to Consider
Broadcom currently has a Zacks Rank #4 (Sell).
Shares of Broadcom have declined 20.1% year to date compared with the Zacks Computer & Technology sector’s decline of 33.5%.
Some better-ranked stocks in the broader sector are Richardson Electronics (RELL - Free Report) , Sanmina (SANM - Free Report) and Super Micro Computer (SMCI - Free Report) . While Richardson Electronics carries a Zacks Rank #2 (Buy), both Sanmina and Super Micro sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Richardson Electronics, Sanmina and Super Micro Computer are up 91.6%, 53.2% and 94.8%, respectively, on a year-to-date basis.