Broadcom Reports Q1 Financial Results

Broadcom Ltd. (NASDAQ: AVGO) reported its first quarter financial results for fiscal year 2018 and beat estimates in both earnings and revenue. Despite the beat, shares were trading 4.2 percent lower midday on Friday.

For the first quarter, Broadcom reported revenue of $5.33 billion, increasing 28.4 percent year over year, and beating analysts’ estimates of $5.2 billion. The company reported an EPS of $5.12, gaining $1.49 year over year, and beating the consensus of $5.04.

Broadcom said the strong quarter saw a boost from its recent acquisition of Brocade Communications due to a large smartphone consumer in North America, which the company did not report in its results.

“We had a very good start to our fiscal year 2018 delivering first quarter revenue and earnings towards the upper end of guidance,” said Hock Tan, President and CEO of Broadcom.

Broadcom’s strong quarter results comes shortly after the the Committee on Foreign Investment in the U.S. blocked the company’s $117 billion bid for Qualcomm Inc. (NASDAQ: QCOM) saying the merger would raise national security concerns.

Tan’s goal of merging the two company was to use Qualcomm’s chipmaker business along with Broadcom’s semiconductor business to be able to push out 5G technology much quicker than others, but the Singapore based company raised concerns that Asia might beat the U.S. to the technology.

Acquiring Qualcomm would have been highly ideal for Broadcom, but regardless of the block, Broadcom’s Chief Financial Officer, Tom Krause says that the company will still look into acquisitions to ensure future growth.

Broadcom will be looking into other acquisitions due to its declining wireless infrastructure segment. The company reported revenue of $1.87 billion for the segment, declining 10 percent year over year. The wireless communications segment was able to offset it as it rose by 88 percent year over year to $2.21 billion.

“In the second quarter, we expect to sustain topline momentum with strong data center demand for our networking and enterprise storage products, and a seasonal recovery in broadband access, to offset a sharp seasonal decline in wireless. Importantly, we expect gross margin to expand and drive free cash flow above our long term target of 40 percent of revenue.” said Tan in the earnings call.

For the second quarter, Broadcom forecasts revenue in the range of $5.0 billion, plus or minus $75 million, on a gross margin of 66 percent, plus or minus 1 percent. The company expects operating expenses of $890 million.

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