Broadcom Inc. Q3 FY2024 Financial Results

Broadcom Inc. (NASDAQ: AVGO) has reported a significant increase in its financial performance for the third quarter of fiscal year 2024, with consolidated net revenue reaching $13.1 billion, marking a 47% rise year-over-year (YoY). The company’s operating profit also saw a substantial boost, climbing 44% YoY.

The growth has been attributed to robust AI revenue, increased bookings from VMware (NYSE: VMW), and stable non-AI semiconductor revenue. Looking ahead, Broadcom has raised its revenue outlook for the fiscal year 2024 to $51.5 billion and anticipates adjusted EBITDA to hit 61.5%.

Key Takeaways

• Broadcom’s Q3 FY2024 net revenue rose to $13.1 billion, a 47% increase YoY.
• Operating profit grew by 44% YoY, driven by strong AI revenue and VMware bookings.
• Q4 FY2024 guidance projects consolidated revenue of $14 billion, up 51% YoY.
• Fiscal 2024 revenue outlook has been raised to $51.5 billion with adjusted EBITDA expected at 61.5%.
• AI revenue is forecasted to exceed $3.5 billion in Q4 and grow significantly in fiscal 2025.
• Broadcom plans to continue its focus on hyperscalers, cloud, and digital natives for AI products.

Company Outlook

• For Q4 FY2024, semiconductor revenue is expected to be around $8 billion, with infrastructure software revenue at $6 billion.
• The company anticipates AI revenue to grow sequentially, surpassing $3.5 billion in Q4.
• Broadcom expects a recovery in non-AI markets and strong AI revenue growth in fiscal 2025.

Bearish Highlights

• The company forecasts a decrease in consolidated gross margins by approximately 100 basis points sequentially due to a higher semiconductor revenue mix.
• Broadcom’s inventory rose to $1.9 billion, a 3% increase from the previous quarter.

Bullish Highlights

• The company ended Q3 with $10 billion in cash and has taken steps to improve its debt profile.
• Broadcom replaced $5 billion of floating rate notes with new fixed senior notes and used proceeds from the sale of VMware’s End-User Computing business to further reduce debt.

Misses

• There were no specific misses reported in the earnings call summary.

Q&A Highlights

• CEO Hock Tan discussed AI revenue, IP relocation to the US, and the growth of AI revenue compared to GPU compute.
• Tan highlighted the profitability and margin improvement expectations for VMware.
• The acquisition of Seagate’s hard disk drive SoC assets was clarified as a strategic partnership, not direct participation in NVIDIA (NASDAQ: NVDA)’s Blackwell product cycle.
• Broadcom’s focus on transforming VMware’s business model and no immediate M&A plans were reiterated.

Broadcom’s financial results reflect a strong performance in the AI sector and a promising outlook for the company’s semiconductor and software divisions. The company’s strategic financial management, including debt restructuring and dividend payouts, showcases a commitment to maintaining a healthy balance sheet while delivering value to shareholders. The emphasis on AI and the collaboration with Seagate indicate Broadcom’s focus on innovation and market trends.

With a clear strategy for the upcoming fiscal year, Broadcom is positioning itself for continued growth in the rapidly evolving tech landscape. The company is set to present further details at the Goldman Sachs Communacopia and Technology Conference and will report its earnings for the fourth quarter and fiscal year 2024 on December 12, 2024.

InvestingPro Insights

Broadcom Inc.’s (NASDAQ: AVGO) impressive growth trajectory is further highlighted by key metrics and insights from InvestingPro. The company’s commitment to shareholder returns is evidenced by a remarkable track record of increasing its dividend for 14 consecutive years, underscoring a reliable income stream for investors. This aligns with Broadcom’s strategic financial management approach, reinforcing the company’s dedication to delivering shareholder value.

InvestingPro Data reveals a robust financial picture, with a market capitalization of $643.68 billion, indicating strong investor confidence in the company’s market position. A significant revenue growth of 32.04% over the last twelve months as of Q3 2024 reflects the company’s successful execution of its growth strategies, particularly in the AI sector and VMware bookings. The P/E ratio stands at a premium of 129.33, suggesting high expectations for future earnings potential.

Moreover, InvestingPro Tips highlight that analysts are optimistic about Broadcom’s sales growth in the current year, which correlates with the company’s raised revenue outlook for fiscal year 2024. The anticipation of profitability this year, as predicted by analysts, further cements the company’s strong performance and its ability to navigate a competitive semiconductor landscape.

For readers interested in a deeper dive into Broadcom’s financial health and future prospects, InvestingPro offers a comprehensive suite of additional tips, with a total of 14 insights available at InvestingPro. These insights provide valuable context for investors considering Broadcom’s stock, particularly as the company continues to innovate and expand its presence in the AI and semiconductor sectors.