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Broadcom (AVGO) Beats Q3 Earnings Estimates, Revenues Up Y/Y

Broadcom AVGO reported third-quarter fiscal 2022 non-GAAP earnings of $9.73 per share, which beat the Zacks Consensus Estimate by 1.14% and improved 39.8% year over year. Our earnings estimate was pegged at $9.67 per share.

Net revenues increased 25% year over year to $8.46 billion, which surpassed the Zacks Consensus Estimate by 0.70%. Our revenue estimate was pegged at $8.41 billion.

The year-over-year growth was driven by strength in networking and server storage.

Broadcom’s shares were up 2.03% in after-hours trading. Shares of Broadcom have declined 26.1% year to date compared with the Zacks Computer & Technology sector’s decline of 28.3%.

Quarter Details

Semiconductor solutions revenues (78.3% of total net revenues) totaled $6.62 billion, up 31.9% year over year. Our estimate for Semiconductor solutions was pegged at $6.38 billion.

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

Infrastructure software revenues (21.7% of net revenues) increased 4.7% year over year to $1.84 billion. Our estimate for Infrastructure software was pegged at $2.03 billion.

The non-GAAP gross margin expanded 90 basis points (bps) on a year-over-year basis to 75.9%. The improvement can be attributed to a higher revenue base.

Research & development, as a percentage of net revenues, declined 300 bps on a year-over-year basis to 11.8%. SG&A expenses declined 50 bps on a year-over-year basis to 2.7%.

Adjusted EBITDA increased 30.4% year over year to $5.38 billion. The adjusted EBITDA margin expanded 270 bps on a year-over-year basis to 63.5%.

The non-GAAP operating margin expanded 230 bps on a year-over-year basis to 58.4%, which can be attributed to an expansion in the gross margin.

Balance Sheet & Cash Flow

As of Jul 31, 2022, cash & cash equivalents were $9.98 billion compared with the $9 billion reported as of May 1, 2022.

The total debt (including the current portion of $304 million) was $39.5 billion as of Jul 31, 2022.

Broadcom generated cash flow from operations of $4.424 billion compared with $4.243 billion in the previous quarter. The free cash flow during the quarter was $4.308 billion compared with $4.158 billion in the prior quarter.

Broadcom spent $1.79 billion on share repurchases and eliminations. On Jun 30, 2022, the company paid a cash dividend of $4.10 per share of common stock, totaling $1.66 billion and a cash dividend of $20 per share of mandatory convertible preferred stock, totaling $75 million.

Guidance

For the fourth quarter of fiscal 2022, Broadcom anticipates revenues of $8.9 billion.

Adjusted EBITDA is expected at approximately 63% of projected revenues in the fiscal fourth quarter.

Zacks Rank & Stocks to Consider

Broadcom currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Computer & Technology sector are Audioeye AEYE, Airbnb ABNB and Amphenol APH. All three stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Audioeye, Airbnb and Amphenol are down 5.9%, 31.8% and 16%, respectively, on a year-to-date basis.


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