Fabless chip and software maker Broadcom (NASDAQ:AVGO) reported Q1 CY2024 results topping analysts' expectations, with revenue up 43% year on year to $12.49 billion. The company's full-year revenue guidance of $51 billion at the midpoint also came in 1.4% above analysts' estimates. It made a non-GAAP profit of $10.96 per share, improving from its profit of $8.15 per share in the same quarter last year.
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Broadcom (AVGO) Q1 CY2024 Highlights:
- Announced a 10-for-1 stock split, effective July 15th
- Revenue: $12.49 billion vs analyst estimates of $12.01 billion (4% beat)
- EPS (non-GAAP): $10.96 vs analyst estimates of $10.84 (1.1% beat)
- The company lifted its revenue guidance for the full year from $50 billion to $51 billion at the midpoint, a 2% increase
- Gross Margin (GAAP): 74.8%, in line with the same quarter last year
- Inventory Days Outstanding: 53, down from 56 in the previous quarter
- Free Cash Flow of $4.45 billion, similar to the previous quarter
- Market Capitalization: $677.1 billion
"Broadcom's second quarter results were once again driven by AI demand and VMware. Revenue from our AI products was a record $3.1 billion during the quarter. Infrastructure software revenue accelerated as more enterprises adopted the VMware software stack to build their own private clouds," said Hock Tan, President and CEO of
Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate that spans wireless, networking, data storage, and industrial end markets along with an infrastructure software business focused on mainframes and cybersecurity.
Processors and Graphics Chips
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth
Broadcom's revenue growth over the last three years has been solid, averaging 18.7% annually. As you can see below, this quarter was especially strong, with revenue growing from $8.73 billion in the same quarter last year to $12.49 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Broadcom had a great quarter as its 43% year-on-year revenue growth exceeded analysts' estimates by 4%.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Broadcom's DIO came in at 53, which is 10 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Broadcom's Q1 Results
It was good to see Broadcom beat analysts' revenue expectations and shrink its inventory levels this quarter. The revenue beat was driven by strong AI demand and VMware, a company it acquired in November 2023. We were also glad its full-year revenue and EBITDA guidance topped Wall Street's estimates. In Nvidia fashion, the company announced a 10-for-1 stock split, which will take effect once the market opens on July 15th. Zooming out, we think this was a great "beat-and-raise" quarter, showing it's staying on track. The stock is up 8.9% after reporting and currently trades at $1,626 per share.
So should you invest in Broadcom right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.