Broadcom Posts Q3 Beat, Guidance Slighly Worse Than Expected

Broadcom (NASDAQ:AVGO) announced its fourth-quarter earnings, with EPS at $11.06, surpassing analysts' expectations of $10.96. The company's revenue for the quarter was reported at $9.3 billion, marginally above the consensus estimate of $9.28 billion.

Looking ahead, Broadcom forecasts its revenue for the fiscal year 2024 to be around $50 billion, which is slightly below the market consensus of $50.25 billion.

In terms of profitability, the company projects its annual adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to be approximately 60% of the anticipated revenue, translating to about $30 billion. This figure represents a substantial increase, nearly $7 billion, from its EBITDA in 2023.

Broadcom (NASDAQ:AVGO) reported its Q3 earnings, revealing an EPS of $10.54, surpassing the analyst projection of $10.43. The revenue for the quarter reached $8.88 billion, slightly exceeding the Street estimate of $8.85 billion.

The company attributed the quarter's revenue growth to heightened demand for advanced networking technologies, driven by the expansion of hyperscale customers and the integration of AI clusters within data centers.

Looking ahead, Broadcom anticipates Q4 2023 revenue to amount to $9.27 billion, in contrast to the projected consensus of $9.28 billion. Additionally, the company expects Adjusted EBITDA for the fourth quarter to be around 65 percent of the forecasted revenue.

Broadcom (NASDAQ:AVGO) shares surged more than 5% on Friday after the company reported its Q1 results, with EPS of $10.33 coming in better than the Street estimate of $10.18. Revenue was $8.92 billion, slightly above the Street estimate of $8.9 billion.

For Q2/23, the company expects revenue to be approximately $8.7 billion, better than the Street estimate of $8.58 billion. Adjusted EBITDA is expected to be approximately 64.5% of projected revenue.

According to the analysts at Deutsche Bank, consistency and stability continue to set the company apart from its peers during a fairly tumultuous time for the semiconductor industry (and the economy as a whole). Notably, management indicated that they expect growth to "moderate" heading into Q2, but believe they can achieve a "soft landing" while still seeing year-over-year growth in H2/23 (due primarily to high-quality revenue mix and aggressive backlog scrubbing).

Broadcom (NASDAQ:AVGO) shares surged more than 5% on Friday after the company reported its Q1 results, with EPS of $10.33 coming in better than the Street estimate of $10.18. Revenue was $8.92 billion, slightly above the Street estimate of $8.9 billion.

For Q2/23, the company expects revenue to be approximately $8.7 billion, better than the Street estimate of $8.58 billion. Adjusted EBITDA is expected to be approximately 64.5% of projected revenue.

According to the analysts at Deutsche Bank, consistency and stability continue to set the company apart from its peers during a fairly tumultuous time for the semiconductor industry (and the economy as a whole). Notably, management indicated that they expect growth to "moderate" heading into Q2, but believe they can achieve a "soft landing" while still seeing year-over-year growth in H2/23 (due primarily to high-quality revenue mix and aggressive backlog scrubbing).

Deutsche Bank analysts provided their outlook on Broadcom Inc. (NASDAQ:AVGO) ahead of the upcoming Q4 results announcement on Dec 8.

The analysts expect the company to continue its historical cadence of delivering solidly in-line or better reports/guides, as a seasonally strong quarter in Wireless Comms (despite a weak handset market) and infrastructure-focused product offerings help offset ongoing macroeconomic uncertainties.

Specifically, the analysts expect the company to weather the handset storm better than other handset-exposed semi companies, given Apple is its sole customer in this segment. Within the remaining segments of the company’s Semiconductor business, the analysts expect some increased volatility due to macro/semi-cycle demand/inventory gyrations, but overall believe its business will remain more resilient than its peers'.

Deutsche Bank provided their views on Broadcom Inc. (NASDAQ:AVGO) following their meeting with CEO Hock Tan and CFO Kirsten Spears. According to the analysts, near-term demand drivers are intact, but thorough backlog management continues. From a demand outlook perspective, management largely reiterated the same message from its most recent earnings call with no meaningful change in customer order behavior or cancellations, albeit with slightly less urgency in expedited deliveries and a continued increase in the thoughtfulness of bookings.

Despite its consistent backlog increases supported by strong secular and co-specific upgrade cycles, the company continues to “thoroughly scrub” its backlog with a goal to lower cyclical volatility in its revenues, both during an up and a down cycle.

Furthermore, while the company continues to believe that current levels of semiconductor growth is not sustainable in the long run, any type of slowdown seems more like an H2/23 or 2024 event.

From a geopolitical perspective, the company doesn’t expect to be impacted by the recent addition of China restrictions. Overall, the analysts mentioned the company remains confident in its mid-term visibility of demand and believes that its noncancellable backlog ($31 billion) with long lead times (50 weeks) combined with a judicious backlog/channel inventory management should lower its revenue volatility in an event a slowdown starts to occur.