Broadcom Reports Quarterly Earnings

Justin Sullivan

In our prior analysis of Broadcom Inc. (NASDAQ:AVGO), we focused on its semiconductor business segment, emphasizing its robust growth propelled by Networking, driven by swift product development in the realm of AI. Additionally, we highlighted positive trends in other segments such as Storage, Wireless, and

Broadcom Top Semiconductor Sub-segments ($ mln)

2023 (Our Previous Forecast)

2023 (Actual)

2024 (Our Previous Forecast)

Networking

10,969

10,934

13,243

Growth (YoY %)

21.4%

21.0%

20.7%

Storage

6,133

4,872

7,246

Growth (YoY %)

39.7%

11.0%

18.1%

Wireless

7,349

7,337

8,386

Growth (YoY %)

-1.8%

-2.0%

14.1%

Broadband

4,606

4,183

5,081

Growth (YoY %)

18.9%

8.0%

10.3%

Total Semiconductor Segment (Excluding Industrial)

29,057

27,220

33,956

Growth (YoY %)

17.2%

9.8%

16.9%

AI-related Revenue

2023

Semiconductor Segment Revenue ($ mln)

28,182

Networking Sub-segment Revenue ($ mln)

10,934

AI-related Revenue under Semiconductor Segment (%)

20.0%

AI-related Revenue under Networking Sub-Segment (%)

51.5%

Broadcom Networking Sub-Segment Projection ($ mln)

2023E

2024F

2025F

2026F

Ethernet Switch Chip

4,164

6,542

6,269

7,660

Growth %

21.2%

57.1%

22.2%

22.2%

Silicon Photonics

1,039

1,651

2,077

2,613

Growth %

25.80%

58.9%

25.80%

25.80%

Custom ASICs

3,000

4,876

7,448

8,453

Growth %

33.33%

62.54%

52.74%

13.50%

Embedded Processors

2,731

2,955

3,197

3,459

Growth %

8.20%

8.20%

8.20%

8.20%

Total Broadcom Networking

10,934

16,024

18,991

22,185

Growth %

21.0%

46.6%

18.5%

16.8%

RF Growth Forecast

2024F

2025F

2026F

2027F

5G Smartphone Adoption Rate

66%

71%

77%

83%

5G Adoption Rate Increase

4.9%

5.3%

5.7%

6.2%

5G Content Increase Factor

2.2

2.2

2.2

2.2

RF Growth Rate Due To 5G Increase (‘a’)

5.7%

6.1%

6.6%

7.1%

Smartphone Market Unit Shipment Growth Rate % (‘b’)

-2.70%

-2.20%

-1.70%

-3.80%

Total RF Growth (‘c’)

2.80%

3.77%

4.78%

3.05%

VMWare Revenue Projection ($ bln)

2024F

2025F

2026F

2027F

2028F

VMWare

12,000

15,878

19,430

24,989

28,567

Growth %

21.3%

22.4%

17.9%

14.3%

VMWare Synergies

1,814

1,814

1,814

1,814

Total VMWare

12,000

17,692

21,244

26,803

30,381

Growth %

47.4%

20.1%

26.2%

13.3%

Mainframe & Distributed Software and Payment Security (CA Technologies)

Market CAGR

2023 Market Size ($ bln)

% Weight

Mainframe Software and Payment Security (Systems Infrastructure Software)

1.8%

147.80

35.2%

Distributed Software (Enterprise Software)

6.6%

271.77

64.8%

Weighted Average CAGR

4.89%

419.57

100.0%

Infrastructure Software Segment ($ bln)

2022

2023E

2024F

2025F

2026F

2027F

2028F

Mainframe & Distributed Software and Payment Security (‘CA’)

3,356

3,408

3,574

3,749

3,932

4,125

4,326

Growth %

-2.4%

1.6%

4.9%

4.9%

4.9%

4.9%

4.9%

Symantec Cybersecurity (Symantec)

2,201

2,560

2,954

3,409

3,934

4,540

5,239

Growth %

15.80%

16.30%

15.40%

15.40%

15.40%

15.40%

15.40%

FC SAN (Brocade)

1,828

1,669

1,766

1,868

1,977

2,091

2,213

Growth %

5.8%

-8.7%

5.8%

5.8%

5.8%

5.8%

5.8%

Virtualization (Total VMWare)

12,000

17,692

21,244

26,803

30,381

Growth %

47.4%

20.1%

26.2%

13.3%

Total Infrastructure Software

7,385

7,637

20,295

26,719

31,087

37,559

42,159

Growth %

4.5%

3.4%

165.7%

31.7%

16.3%

20.8%

12.2%

Expense Analysis (% of Revenue)

2023 Actual

Our Previous 2023 Forecast

COGS (Excluding D&A)

15.2%

9.9%

Depreciation & Amortization

10.7%

12.4%

Gross Profit

74.1%

77.7%

Research And Development

14.7%

17.5%

Selling, General And Administrative

4.4%

17.5%

Other Expenses (Income)

9.1%

10.8%

Earnings Before Interest & Taxes (‘EBIT’)

45.9%

32.0%

Interest

-3.0%

-4.9%

Other Non-Operating Expenses (Income)

0.8%

0.0%

Earnings Before Tax

42.1%

27.1%

Tax

2.8%

2.0%

Net Earnings

39.3%

25.1%

Minority Interests

0.0%

0.0%

Net Earnings To Shareholders

39.3%

25.1%

Other Comprehensive Income

0.0%

-0.8%

Total Comprehensive Income To Shareholders

39.3%

24.2%

Net Operating Income

2019

2020

2021

2022

2023

Semiconductor Solutions ($ mln)

1,989

2,125

5,486

10,356

11,830

Infrastructure Software ($ mln)

1,455

1,889

3,033

3,869

4,377

Semiconductor Solutions margin (%)

11.4%

12.3%

26.9%

40.1%

42.0%

Infrastructure Software margin (%)

28.2%

28.5%

42.9%

52.4%

57.3%

Broadcom SG&A Projection ($ mln)

2024F

2025F

2026F

2027F

2028F

Broadcom Revenue

39,359

44,911

50,853

57,261

64,103

SG&A % of Revenue

4.45%

4.45%

4.45%

4.45%

4.45%

SG&A

1,750

1,997

2,262

2,547

2,851

VMWare Revenue

12,000

17,692

21,244

26,803

30,381

SG&A % of Revenue

44%

39%

34%

29%

29%

SG&A

5,320

6,959

7,294

7,862

8,912

Total Combined SG&A

7,070

8,956

9,555

10,409

11,763

SG&A % of Revenue

13.8%

14.3%

13.3%

12.4%

12.4%

Broadcom R&D Projection ($ mln)

2024F

2025F

2026F

2027F

2028F

Broadcom Revenue

39,359

44,911

50,853

57,261

64,103

R&D % of Revenue

14.67%

14.67%

14.67%

14.67%

14.67%

R&D Expenses

5,772

6,586

7,458

8,398

9,401

VMWare Revenue

12,000

17,692

21,244

26,803

30,381

R&D % of Revenue

23%

23%

23%

23%

23%

Total Combined R&D Expenses

2,737

4,035

4,845

6,113

6,929

Total R&D

8,509

10,621

12,303

14,510

16,330

R&D % of Revenue

16.6%

17.0%

17.1%

17.3%

17.3%

Earnings & Margins

2021

2022

2023

2024F

2025F

2026F

2027F

2028F

Gross Margin

73.91%

75.13%

74.11%

77.33%

79.22%

75.93%

77.12%

78.13%

EBIT Margin

31.64%

43.03%

45.94%

37.93%

38.88%

36.55%

38.41%

39.33%

Net Margin

24.54%

34.62%

39.31%

26.62%

27.96%

24.59%

26.60%

27.68%

Source link