01—Abstract
Summary
Summary of the 10-Q filed June 13, 2024. Cited figures are marked; the original filing is the authoritative source.
Broadcom Inc. (AVGO) reported strong top-line growth in its latest 10-Q filing for the period ending May 4, 2024.
Total net revenue surged by 43% year-over-year to $12.49 billiona for the quarter, driven primarily by a substantial 175% increase in Infrastructure Software revenue, largely attributed to the VMware acquisition. Semiconductor Solutions revenue also saw a healthy 6% increase. Despite the revenue growth, operating income decreased by 26% to $2.97 billion, impacted by higher operating expenses, particularly a significant increase in amortization of acquisition-related intangible assets and stock-based compensation, largely stemming from the VMware integration.
The company's balance sheet shows a dramatic increase in total assets to $175.2 billionb, up from $72.9 billion at the end of the prior fiscal year, primarily due to the inclusion of VMware's assets and significant goodwill recognized from the acquisition. Long-term debt also saw a substantial rise to $71.6 billion from $37.6 billion.
Cash flow from operations remained robust at $9.4 billionc for the first two fiscal quarters, but investing activities show a significant outflow of $26.2 billion, dominated by acquisitions. The company reaffirmed its liquidity position, stating that current cash, cash equivalents, and revolving credit facility are sufficient to meet obligations for the next 12 months.
02—Key points
Key Highlights
- Total net revenue for the fiscal quarter increased by 43% to $12.49 billion, driven by the VMware acquisition impacting Infrastructure Software revenue significantly.
- Infrastructure Software revenue grew by 175% year-over-year to $5.29 billion, largely due to the consolidation of VMware's results.
- Semiconductor Solutions revenue increased by 6% to $7.20 billion, supported by demand in networking products, including AI networking.
- Operating income decreased by 26% to $2.97 billion, impacted by higher operating expenses, including amortization of acquisition-related intangible assets and stock-based compensation.
- Total assets surged to $175.2 billion, largely driven by the acquisition of VMware, which included substantial goodwill and intangible assets.
- Long-term debt increased significantly to $71.6 billion, reflecting borrowings associated with the VMware acquisition.
- Cash flow from operating activities remained strong at $9.4 billion for the first two fiscal quarters, indicating healthy cash generation from ongoing operations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Broadcom kept $0.17.
- Revenue$12.49B100.0%
- Cost of revenue−$4.71B37.7%
- Gross profit$7.78B62.3%
- Operating costs−$4.81B38.5%
- Operating income$2.96B23.7%
- Interest, other & tax−$844.0M6.8%
- Net income$2.12B17.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed June 13, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $12.49B$8.73B | +43.0% |
| Cost of Revenue | $4.71B$2.62B | +79.9% |
| Gross Profit | $7.78B$6.12B | +27.2% |
| R&D Expenses | $2.42B$1.31B | +84.1% |
| SG&A Expenses | $1.28B$438.00M | +191.6% |
| Operating Expenses | $4.81B$2.11B | +128.3% |
| Operating Income | $2.96B$4.01B | −26.0% |
| Interest Expense | $1.05B$405.00M | +158.5% |
| Net Income | $2.12B$3.48B | −39.1% |
| EPS (Basic) | $0.46$0.84 | −45.2% |
| EPS (Diluted) | $0.44$0.82 | −46.0% |
| Shares Outstanding (Basic) | 4.64B4.15B | +11.9% |
| Shares Outstanding (Diluted) | 4.80B4.27B | +12.4% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the significant increase in revenue for the Infrastructure Software segment?
The significant increase in Infrastructure Software revenue, a 175% year-over-year jump to $5.29 billion for the quarter, is primarily driven by the acquisition of VMware, Inc., which was completed in November 2023. The results of VMware have been consolidated into Broadcom's financial statements, substantially contributing to this segment's growth.
Why did operating income decrease despite strong revenue growth?
Operating income decreased by 26% to $2.97 billion for the quarter primarily due to a substantial increase in operating expenses. Key contributors include higher amortization of acquisition-related intangible assets and increased stock-based compensation expense, both largely attributable to the integration and acquisition accounting related to the VMware transaction.
How has the VMware acquisition impacted Broadcom's balance sheet?
The VMware acquisition has dramatically altered Broadcom's balance sheet. Total assets have more than doubled, reaching $175.2 billion, largely due to the recognition of goodwill ($54.2 billion) and acquired intangible assets ($45.6 billion) from VMware. Correspondingly, long-term debt has also increased significantly to $71.6 billion to finance the acquisition.
What is the company's outlook on liquidity and its ability to meet short-term obligations?
Broadcom maintains a strong liquidity position. As of May 5, 2024, the company reported $9.8 billion in cash and cash equivalents. Combined with anticipated cash flow from operations and available capacity under its revolving credit facility, Broadcom believes it has sufficient liquidity to meet its obligations for at least the next 12 months.
06—Continue