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Broadcom (AVGO) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

Broadcom AVGO reported fourth-quarter fiscal 2023 non-GAAP earnings of $11.06 per share, beating the Zacks Consensus Estimate by 1% and improving 6.7% year over year.

Net revenues increased 4.1% year over year to $9.295 billion, which surpassed the Zacks Consensus Estimate by 0.18%.

Top-Line Details

Semiconductor solutions revenues (78.8% of revenues) totaled $7.326 billion, up 3.3% year over year, driven by the strong adoption by hyperscalers.

Generative AI revenues, driven by Ethernet solutions and custom AI accelerators, were $1.5 billion or 20% of semiconductor revenues in the reported quarter.

Broadcom Inc. Price, Consensus and EPS Surprise

 

Broadcom Inc. Price, Consensus and EPS Surprise
Broadcom Inc. Price, Consensus and EPS Surprise

Broadcom Inc. price-consensus-eps-surprise-chart | Broadcom Inc. Quote

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Networking revenues were $3.1 billion, up 23% year over year, representing 42% of Broadcom’s semiconductor revenues. The company witnessed strong demand for its custom AI accelerators, networking switches, routers and Network Interface Card from hyperscale customers.

Storage connectivity revenues were $1 billion, accounting for 14% of semiconductor revenues and down 17% year over year.

Broadband revenues declined 9% year over year to $950 million and accounted for 13% of semiconductor revenues. Wireless revenues of $2 billion represented 27% of semiconductor revenues and were down 3% year over year.

Industrial resale revenues of $236 million were flat year over year.

Infrastructure software revenues (21.2% of net revenues) increased 7.1% year over year to $1.969 billion.

The consolidated renewal rate average was 119% of expiring contracts. In strategic accounts, the renewal rate average was 130%.

Operating Details

The non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis to 74.3%.

Research and development, as a percentage of net revenues, declined 40 bps on a year-over-year basis to 10.1%. SG&A expenses declined 30 bps on a year-over-year basis to 2.4%.

Adjusted EBITDA increased 5.7% year over year to $6.048 billion. The adjusted EBITDA margin expanded 100 bps on a year-over-year basis to 65.1%.

The non-GAAP operating margin expanded 20 bps on a year-over-year basis to 61.8%.

Balance Sheet & Cash Flow

As of Oct 29, 2023, cash and cash equivalents were $14.19 billion compared with $12.06 billion reported as of Jul 30, 2023.

Total debt (including the current portion of $1.608 billion) was $39.29 billion as of Oct 29, 2023, compared with $39.34 billion as of Jul 30, 2023.

Broadcom generated a cash flow from operations of $4.828 billion compared with $4.719 billion in the previous quarter. The free cash flow in the quarter was $4.723 billion compared with $4.6 billion in the prior quarter.

Broadcom raised quarterly common stock dividend by 14% to $5.25 per share for fiscal 2024.

On Sep 29, 2023, the company paid out a cash dividend of $4.60 per share of common stock, totaling $1.904 billion. In fiscal 2023, Broadcom spent $13.5 billion on repurchases and dividend payments.

Guidance

For fiscal 2024, the company expects revenues of $50 billion. Adjusted EBITDA is expected to be 60% of projected revenues.

For fiscal 2024, VMware is expected to contribute $12 billion to revenues. Infrastructure software revenues are expected to be $20 billion.

Networking revenues are expected to grow 30% year over year, driven by the accelerating deployment of networking connectivity and the expansion of AI accelerators within hyperscalers for fiscal 2024.

Wireless revenues are expected to be stable year over year. Broadcom expects server storage revenues to decline in the mid to high-teens percentage on a year-over-year basis. Broadband revenues are anticipated to decline year over year in the low to mid-teens percentage range.

Industrial resales are expected to decline in the low-single digits for fiscal 2024.

Broadcom expects revenues from generative AI to represent more than 25% of the semiconductor revenues in fiscal 2024. Semiconductor solutions revenues are expected to increase in the mid to high-single-digit percentage range on a year-over-year basis.

Zacks Rank & Other Stocks to Consider

Broadcom currently has a Zacks Rank #2 (Buy).

Shares of Broadcom have gained 64.9% year to date compared with the Zacks Computer & Technology sector’s growth of 43.6%.

BlackLine BL, Badger Meter BMI and Ceridian HCM CDAY are some other top-ranked stocks in the broader sector. These three companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackLine shares have lost 10.5% year to date. The long-term earnings growth rate is pegged at 50.56%.

Badger Meter shares have gained 36.1% year to date. The long-term earnings growth rate is pegged at 20.39%.

Ceridian shares have gained 3.5% year to date. The long-term earnings growth rate is pegged at 44.15%.

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