Wireless Growth Drives Solid Quarter for Broadcom
Image Source: Broadcom.
Semiconductor company Broadcom (NASDAQ: AVGO) reported its fiscal third-quarter results after the market close on Sept. 1. The company's wireless business grew at an impressive pace, more than offsetting flat sequential sales in the wired infrastructure and enterprise storage segments. Wireless is expected to continue to drive Broadcom's results during the fourth quarter as new high-profile mobile devices are launched.
Here's what investors need to know about Broadcom's third-quarter results.
Broadcom: The raw numbers
|
Q3 2016 |
Q3 2015 |
Growth (YOY) |
|
|---|---|---|---|
|
Revenue |
$3.79 billion |
$1.74 billion |
119% |
|
GAAP EPS |
($0.75) |
$0.84 |
(189%) |
|
Non-GAAP EPS |
$2.89 |
$2.24 |
29% |
Q3 2015 results were prior to the Broadcom-Avago merger. Data source: Broadcom Q3 2016 earnings report.
What happened with Broadcom this quarter?
Strong growth in the wireless communications segment drove Broadcom's results.
- The wireless communications segment generated $1 billion of revenue, up 36% sequentially and up 64% year over year.
- Wired infrastructure revenue of $2.06 billion was flat sequentially, but up 454% year over year as a result of the Broadcom-Avago merger.
- The enterprise storage segment produced $527 million of revenue, flat sequentially and down 10% year over year.
- Industrial and other revenue was $195 million, up 19% sequentially and up 23% year over year.
- Cash from operations was $963 million, up from $592 million during the prior-year period.
Broadcom's guidance for the fourth quarter calls for further sequential growth.
- Revenue of $4.09 billion, non-GAAP gross margin of 60.5%, and non-GAAP operating expenses of $808 million are expected. This implies non-GAAP EPS of approximately $3.34.
What management had to say
Broadcom CEO Hock Tan summed up the quarter:
During the company's second-quarter earnings conference call in June, Tan pointed to new products from a large North American smartphone customer, presumed to be Apple, as a key driver of its wireless business for the second half of the year:
Looking forward
While non-cash charges totaling nearly $1 billion related to the merger kept Broadcom in the red on a GAAP basis, adjusted earnings outpaced revenue growth sequentially, growing by 14% compared to the second quarter. The wireless business was the star of the show, driven by the ramping of upcoming mobile devices, and that will likely remain true during the fourth quarter.
The enterprise storage business continued to falter, but the segment managed to outperform the company's expectations. Broadcom had previously said that it had expected a low-single-digit drop in sales sequentially during the third quarter, worse than the flat sales the company ultimately reported. The storage business is expected to begin to pick up in the fourth quarter.
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Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends AAPL. The Motley Fool has the following options: long January 2018 $90 calls on AAPL and short January 2018 $95 calls on AAPL. The Motley Fool recommends Broadcom. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.