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.
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.
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.
Want to know the #1 semiconductor stock for 2022?
Few people know how promising the semiconductor market is. Over the past two years, supply chain disruptions have caused shortages in several industries. The absence of a single semiconductor can halt all operations in some industries.
This year, the companies that create and produce this essential material will have incredible pricing power. For a limited time, Zacks reveals the best semiconductor stock for 2022. Find it in our new special report, A semiconductor stock is expected to earn the most.
Today it’s yours for free and without obligation.>>Give me access to my free special report.
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Amphenol Corporation (APH): Free Stock Analysis Report
Broadcom Inc. (AVGO): Free Stock Analysis Report
Audioeye, Inc. (AEYE): Free Stock Analysis Report
Airbnb, Inc. (ABNB): Free Inventory Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.