Broadcom (AVGO) beats third-quarter earnings estimates, revenue rises year-over-year

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

Net revenue grew 25% year-over-year to $8.46 billion, beating Zacks’ consensus estimate by 0.70%. Our revenue estimate was set at $8.41 billion.

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

Broadcom shares rose 2.03% in after-hours trading. Broadcom shares are down 26.1% year-to-date, compared with a 28.3% drop in Zacks’ IT and technology sector.

Quarter details

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

Broadcom Inc. Price, Consensus and EPS Surprise

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

Infrastructure software revenue (21.7% of net revenue) increased 4.7% year-over-year to $1.84 billion. Our estimate for infrastructure software was set at $2.03 billion.

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

Research and development, as a percentage of net revenue, fell 300 basis points on an annual basis to 11.8%. General and administrative expenses decreased 50 basis points year over year to 2.7%.

Adjusted EBITDA increased 30.4% year over year to $5.38 billion. Adjusted EBITDA margin increased 270 basis points year over year to 63.5%.

Non-GAAP operating margin increased 230 basis points year on year to 58.4%, which can be attributed to gross margin expansion.

Balance sheet and cash flow

As of July 31, 2022, cash and cash equivalents were $9.98 billion, compared to $9 billion as of May 1, 2022.

Total debt (including the current portion of $304 million) was $39.5 billion as of July 31, 2022.

Broadcom generated operating cash flow of $4.424 billion, compared to $4.243 billion in the prior quarter. Free cash flow in the quarter was $4.308 billion, compared to $4.158 billion in the prior quarter.

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

Tips

For the fourth quarter of fiscal 2022, Broadcom is forecasting revenue of $8.9 billion.

Adjusted EBITDA is expected to be approximately 63% of forecast revenue in the fourth fiscal quarter.

Zacks Ranking and Stocks to Consider

Broadcom currently has a Zacks rank of #3 (Hold).

Some top-ranked stocks in the IT and technology sector are audioeye AEYE, Airbnb ABNB and Amphenol APH. All three stocks have a Zacks rank of No. 2 (buy). You can see the full 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, since the start of the year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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