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The Broadcom Earnings Call: A Steady Q2 Sets the Expectations For Q3

Broadcom Inc. (NASDAQ: AVGO) is headquartered in California and its product offerings cover a wide range of business-critical components.  The Broadcom earnings call was held on June 1, 2022.

Hoc Tan, President and CEO, started the Broadcom earnings conference call by addressing the company’s decision to acquire VMware, guidance for the third quarter, and the Q2 results. For the second quarter of 2022 that ended on May 1, 2022, Broadcom reported net revenue of $8.103 billion, up 23% year-on-year (YoY). He revealed that semiconductor solutions revenue growth accelerated to 29% year on year to $6.2 billion and infrastructure software revenue grew 5% year on year to $1.9 billion.

In the hardware segment, backlog has grown to $29 billion at the end of Q2 while it was $25 billion in Q1 and $21 billion in the previous year. Meanwhile, the software segment saw a backlog of $15 billion for the second quarter compared to the $14 billion it recorded a year ago.  

Image: Hock E. Tan

Tan admitted that Broadcom revenue was driven by networking and server storage in the second quarter. During the Broadcom earnings call, he also mentioned that the company is expecting massive growth in the next-generation server storage solutions segment as hyperscalers are aggressively adopting the firm’s offerings. He is also hopeful when it comes to Broadcom’s broadband revenue. In Q3, the company expects to sustain a growth of around 20% YoY. The earnings call transcripts reveal that he is confident Broadcom will see better days ahead.

The semiconductor solutions segment is another growth story as revenue was up 29% year on year for Q2, a step-up from the 20% year-on-year growth in the preceding quarter. Bolstered by steady sales, the software product supplier has forecast growth of 31% YoY for the third quarter. With innovative solutions and a commitment to R&D, Broadcom is looking forward to tremendous growth in this segment which will eventually fund new discoveries that can support customer needs.

Addressing the decision to buy VMware, Han stated that the acquisition will help Broadcom expand its software business to meet current market demands. It will reinforce the company’s image as the “premier provider of mission-critical business solutions.” The earnings call transcripts reveal that he went on to elaborate the many benefits of acquiring VMware as it extended its platform to private cloud. He mentioned that VMware makes for a great partner as it has a world-class team, engineering-centric culture, and strong customer and partner relationships. Han believes that the merger will create additional value for stakeholders of the company.  

After Han’s speech, Broadcom Group Software President, Tom Krause, took over the Broadcom earnings call and spent quite some time elaborating on VMware’s strengths and how they complement the business. The earnings call transcripts show that he talked of leveraging its multi-cloud offerings to deliver end-to-end capabilities for enterprise customers.

Thereafter, speaking about Broadcom revenue and future plans, Kristin Spears, CFO of Broadcom Inc., stated, “We generated $4.2 billion in free cash flow and are expecting free cash flow to remain strong in the third quarter. Consistent with our commitment to return excess cash to shareholders, we returned $4.5 billion to shareholders in the quarter including $1.7 billion of cash dividends and $2.8 billion of share repurchases.” She also asserted that gross margin was 76% of revenue in the quarter and up 145 basis points YoY.

“Broadcom repurchased $2.8 billion in common stock and eliminated $514 million of common stock for taxes due on vesting of employee equity, resulting in the elimination of approximately 6 million AVGO shares.”

During the AVGO earnings call, she also mentioned that the company remains committed to maintaining its investment-grade rating and plans to deliver steady growth.

The Broadcom earnings call concluded with a Q & A session with analysts and experts.

Christy Gren

Christy Gren is an Industry Specialist Reporter at Industry Leaders Magazine she enjoys writing about Unicorns, Silicon Valley, Startups, Business Leaders and Innovators. Her articles provide an insight about the Power Players in the field of Technology, Auto, Manufacturing, and F&B.

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