A month has gone by since the last earnings report for Broadcom Inc. (AVGO Quick QuoteAVGO - Free Report) . Shares have added about 1.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Broadcom Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Broadcom Tops Q2 Earnings Estimates, Revenues Miss

Broadcom has reported mixed second-quarter fiscal 2019 results. Non-GAAP earnings of $5.21 per share beat the Zacks Consensus Estimate of $5.17. The figure improved 6.8% from the year-ago quarter.

Non-GAAP revenues from continuing operations were $5.517 billion, up 10% from the year-ago quarter. The figure missed the Zacks Consensus Estimate of $5.663.

Segmental Revenues

Semiconductor solutions’ revenues (74% of total revenues) totaled $4.088 billion, down 10% from the year-ago quarter.

Infrastructure software revenues (26% of total revenues) skyrocketed 216% year over year to roughly $1.413 billion. Robust performance in SAN switching was a tailwind.

Revenues for Intellectual property licensing were $16 million during the reported quarter compared with $30 million in the year-ago period.

Furthermore, we believe that the company is well positioned to benefit from synergies from the CA buyout. In fact, CA’s strength in enterprise software offerings and substantial customer base are anticipated to enable Broadcom to explore the infrastructure software market and expand its TAM.

Operating Details

Non-GAAP gross margin expanded 540 basis points (bps) on a year-over-year basis to 72%. The increase was buoyed by favorable product mix and higher revenue base.

Non-GAAP operating expenses increased 15.2% year over year to $1.022 billion. Operating margin expanded 460 bps from the year-ago quarter to 53.5%.

Liquidity

As of May 5, 2019, cash & cash equivalents were $5.33 billion compared with $5.1 billion in the previous quarter. Long-term debt was $34 billion at the end of the fiscal second quarter compared with $34.1 billion in the prior quarter.

Broadcom generated cash flow from operations of roughly $2.67 billion compared with $2.1 billion in the previous quarter. Capital expenditure totaled $125 million, up from the last reported quarter’s $99 million. Free cash flow during the quarter under review was $2.54 billion.

During the reported quarter, the company repurchased approximately 4.7 million shares for $1.33 billion. Additionally, Broadcom returned $1.1 billion in forms of dividends to shareholders during the fiscal second quarter. The company also approved a quarterly cash dividend of $2.65 per ordinary share.

Guidance

The company updated its outlook for fiscal 2019. Broadcom now forecasts non-GAAP revenues of almost $22.5 billion (previously $24.5 billion).

Non-GAAP operating margin is now anticipated to be 52.5% (previously 51%).

The company continues to project capital expenditure of $550 million for fiscal 2019.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Broadcom Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Broadcom Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.