Semiconductor giant Broadcom (AVGO 3.08%) reported its fiscal second-quarter results after the market closed on June 1. With the merger between Broadcom and Avago lapped, year-over-year comparisons have once again become meaningful. Strong demand drove a double-digit increase in both revenue and profits, and the company sees this growth continuing into the third quarter. Here's what investors need to know about Broadcom's second-quarter results.
Broadcom results: The raw numbers
|
Metric |
Q2 2017 |
Q2 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$4.19 billion |
$3.54 billion |
18.3% |
|
Net income attributable to ordinary shares |
$440 million |
($1.19 billion) |
N/A |
|
Non-GAAP EPS |
$3.69 |
$2.53 |
45.8% |
Data source: Broadcom.
Image source: Broadcom.
What happened with Broadcom this quarter?
Broadcom beat its own guidance for both revenue and earnings, with robust year-over-year growth in most of its segments.
- The wired infrastructure segment produced revenue of $2.1 billion, up 2% year over year and up 1% sequentially.
- The wireless communications segment produced revenue of $1.15 billion, up 45% year over year and down 2% sequentially.
- The enterprise storage segment produced revenue of $712 million, up 36% year over year and up 1% sequentially.
- The industrial & other segment produced revenue of $217 million, up 32% year over year and up 25% sequentially.
- Cash from operations was $1.58 billion, up from $622 million during the second quarter of 2016 and $1.35 billion during the first quarter of 2017.
- Broadcom continued its quarterly interim dividend of $1.02 per share, payable on June 30 to shareholders of record.
Broadcom provided the following guidance for the third quarter:
- Revenue of $4.445 billion, plus or minus $75 million, compared to $3.792 billion in the third quarter of last year.
- Non-GAAP gross margin of 63%, plus or minus 1%, and non-GAAP operating expense of $787 million.
- Guidance implies non-GAAP EPS of $4.01.
What management had to say
Broadcom President and CEO Hock Tan sees strong demand for the company's products continuing in the third quarter:
We delivered strong financial results for our second fiscal quarter with revenue, gross margin and EPS all above the top end of guidance. Anticipating that end markets will remain healthy, we expect third fiscal quarter revenue growth of approximately six percent sequentially, driven by solid growth from our wired segment and a seasonal second half ramp in our wireless segment.
Looking forward
With the merger between Broadcom and Avago, which created the current iteration of Broadcom, now lapped, year-over-year comparisons once again reflect the organic growth of the business. Broadcom didn't disappoint during the second quarter, with total revenue growing faster than the 15% organic revenue growth target offered in the first-quarter report.
Another quarter of double-digit revenue growth is expected during the third quarter, with the company pointing to solid demand in its end markets. GAAP earnings are being dragged down by acquisition-related charges, but adjusted profit is soaring right along with revenue.
