Broadcom Inc reports Q3 2020 financial results beating market expectations

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Broadcom Inc reports Q3 2020 financial results beating market expectations

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Broadcom Inc. (Nasdaq: AVGO) is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions, announced its third-quarter financial results for the fiscal year 2020, ended 2nd August 2020, on 3rd September’2020.

According to Hock Tan, President, and CEO of Broadcom third-quarter revenue results in-line with the company expectations, driven by healthy demand from cloud and telecom customers, which more than offset the expected reset in wireless.

COVID-19 pandemic has lead to supply chain disruptions which highly impacted financial results for this year. However, the company managed to present better than expected third-quarter sales.

THIRD QUARTER 2020 RESULTS

  1. The company reported revenue of $5,821 million in the third quarter of 2020, a 6% increase from the third quarter 2019 which reported revenue of $5,515 million.
  2. The revenue earned comprises 74% of product revenue and 26% of subscription and services revenue, which were reported $4,253 million and $1,489 million respectively.
  3. The net income fell by 18% from the previous year, from $691 million in the third quarter 2019 to $568 million in the third quarter of 2020, this was mainly due to an increase in operating expenses which grew by 14% from the previous year.
  4. Segment-wise financial results-The company Reports two operating segments: Semiconductor Solutions and Infrastructure Software
    1. Semiconductor Solutions: Revenue for this segment declined by 4% YoY, from $4,375 million in 2019 to $4,219 million in 2020. Operating income reported for the Semiconductor segment was $1840 million, approximately a 3% decline from the previous year which was reported $1,899 million.
    2. Infrastructure software: While revenue from the Infrastructure software segment rose by 41% YoY, from $1140 million in 2019 to $1,602 million in 2020. Operating income increased by approximately 14% from $1,050 million in third-quarter 2019 to $1,840 million in the third quarter of 2020.
  5. Broadcom’s cash and cash equivalents for the third fiscal quarter were $8,857 million, compared to $9,207 million at the end of the prior quarter.
  6. During the third fiscal quarter of 2020, Broadcom generated $3,178 million in cash from operations and spent $105 million on capital expenditures. The free cash flow reported for the third quarter of $3,073 million, increased 33% YoY.
  7. The adjusted EBITDA reported by the company for the third fiscal was $3,342 million.
  8. Broadcom announced its dividends per share to common stockholders for the third quarter of the fiscal year 2020 to be $3.25 per share.
  9. GAAP Diluted EPS of $1.45 by the company.
  10. Geographical Revenue: The company reported revenue from the Asia Pacific for about 62%of the total revenue, while 25% of total revenue from America and the rest from EMEA.
  11. Broadcom is one of the key Apple (NASDAQ: AAPL) suppliers. In 2019, one-fifth of Broadcom’s revenue was from supplying to Apple, which fell due to Covid-19 disruptions in the business.

Outlook

Hock Tan, President, CEO of Broadcom said “Our outlook for the fourth quarter reflects a strongly anticipated ramp in wireless, as well as the continuing surge in demand for networking from cloud and telecom customers, more than offsetting expected softness in the enterprise”

The company reported fourth-quarter guidance, and the outlook is expected to be :

  • Fourth-quarter revenue guidance of $6.4 billion-plus or minus $150 million
  • Fourth-quarter Adjusted EBITDA of $3,744 million-plus or minus $75 million, or 58.5% of revenue at the midpoint of guidance

This is an estimate provided by the company, actual numbers may vary.

Due to Covid-19, Hock Tan, President, CEO discussed a “major product cycle delay” which is expected to be completed in the next quarter which would lead to gain in semiconductor segment sales.

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