Yahoo Finance Broadcom (AVGO) Q1 Earnings Beat Estimates, Revenues Up Y/Y
Broadcom AVGO reported first-quarter fiscal 2023 non-GAAP earnings of $10.33 per share, beating the Zacks Consensus Estimate by 1.67% and improving 16.2% year over year.
Net revenues increased 15.7% year over year to $8.92 billion, which surpassed the Zacks Consensus Estimate by 0.29%.
The year-over-year growth was driven by strength in networking and server storage.
Broadcom’s shares were up 0.39% in pre-market trading.
Top-Line Details
Semiconductor solutions revenues (79.7% of total net revenues) totaled $7.11 billion, up 21% 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 $2.3 billion, up 20% year on year, representing 32% of Broadcom’s semiconductor revenues. The company witnessed strong growth from the deployment of Tomahawk 4 for data center switching at hyperscale customers.
Storage connectivity revenues were $1.3 billion, accounting for 18% of semiconductor revenues and up 57% year over year.
Broadband revenues jumped 34% year over year to $1.2 billion and accounted for 17% 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 4% year-over-year growth.
Industrial resale revenues of $229 million declined 4% year over year as softness in China mostly offset the strength in renewable energy and medical end-markets.
Infrastructure software revenues (20.3% of net revenues) decreased 1% year over year to $1.8 billion.
Core software revenues grew 5% year over year. Consolidated renewal rates average was 119% of expiring contracts despite adverse forex. In strategic accounts, the renewal rate average was 129%.
In strategic accounts, annualized bookings of $536 million included $197 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 first quarter were $5.3 billion, up 3% year over year.
Operating Details
Non-GAAP gross margin contracted 180 basis points (bps) on a year-over-year basis to 73.8%.
Research & development (R&D), as a percentage of net revenues, declined 180 bps on a year-over-year basis to 10.4%. SG&A expenses declined 50 bps on a year-over-year basis to 2.5%.
Adjusted EBITDA increased 17.8% year over year to $5.68 billion. The adjusted EBITDA margin expanded 120 bps on a year-over-year basis to 63.7%.
The non-GAAP operating margin expanded 50 bps on a year-over-year basis to 60.9%.
Balance Sheet & Cash Flow
As of Jan 29, 2023, cash & cash equivalents were $12.65 billion compared with $12.42 billion reported as of Oct 30, 2022.
Total debt (including the current portion of $1.12 billion) was $39.28 billion as of Jan 29, 2023.
Broadcom generated a cash flow from operations of $4.036 billion compared with $4.583 billion in the previous quarter. Free cash flow during the quarter was $3.933 billion compared with $4.461 billion in the prior quarter.
On Dec 30, 2022, the company paid a cash dividend of $4.60 per share of common stock, totaling $1.93 billion. In the fiscal first quarter, Broadcom spent $1.521 billion on repurchases and eliminations.
Guidance
For the second quarter of fiscal 2023, Broadcom anticipates revenues of $8.7 billion. Semiconductor revenue growth is expected in the high single-digit percentage range on a year-over-year basis.
Management expects networking revenues to be strong and grow roughly 20% year over year in the fiscal second quarter. Server storage connectivity revenues are expected to grow a modest 20% year over year. Broadband revenues are expected to grow roughly 10% year over year.
Broadcom expects wireless revenues to decline high-single-digit percentage 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 up low-to-mid single-digit percentage year over year, reflecting stable core software revenue growth, offset by a year-over-year decline in the Brocade enterprise business revenues.
Adjusted EBITDA is expected at approximately 64.5% of projected revenues in the fiscal second quarter.
Broadcom also expects gross margins to be up approximately 150 bps sequentially, on a favorable product mix. R&D spending is expected to increase sequentially on continuing hiring of engineers and seasonal payroll tax step-ups.
Zacks Rank & Stocks to Consider
Broadcom currently has a Zacks Rank #3 (Hold).
Shares of Broadcom have gained 0.4% in the past year against the Zacks Computer & Technology sector’s decline of 15.9%.
MongoDB MDB, PagerDuty PD, and Methode Electronics MEI are some better-ranked stocks that investors can consider in the broader sector. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MongoDB shares have declined 32.9% in the past year. MDB is set to report its fourth-quarter fiscal 2023 results on Mar 8.
PagerDuty shares have declined 0.3% in the past year. PD is set to report its fourth-quarter fiscal 2023 results on Mar 15.
Methode Electronics shares have gained 17.4% in the past year. MEI is set to report its third-quarter fiscal 2023 results on Mar 9.
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