Broadcom improves revenue by 14 percent in FQ1 due to strong chip demand

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Broadcom revenue

Broadcom grew its fiscal first-quarter revenue by 14 percent thanks to strong demand for its electronic components. The firm, which makes parts for Apple’s iPhone lineup, experienced a 17 percent year-over-year jump in its semiconductor solutions income.

The corporation expects its performance will be even better in the current period, predicting an 18 percent rise in sales.

CEO Hock Tan also revealed “virtually 90 percent” of the fabless manufacturer’s supply has been ordered by its clients. However, the executive believes the robust interest in its products is legitimate and not a reflection of anxieties caused by the global chip shortage.

Broadcom’s FQ1 Financial Performance

In the three months ending January 31, Broadcom took in $6.655 billion, exceeding the guidance it offered last December. Its adjusted earnings per share (EPS) reached $3.05, a massive increase on the $0.74 it made in the same period last year. Its semiconductor sales totaled $4.91 billion, which fell short of Wall Street’s consensus estimate of $4.93 billion.

Based on Tan’s commentary during an analyst conference call, its slight underperformance came from weakness in its enterprise segment. He noted purchases of the corporation’s server storage fell by 22 percent year-over-year. OEMs feel no urgency to replenish those components as they have sufficient inventory on hand.

However, other aspects of Broadcom’s business benefited from significant spikes in end-market interest. Its networking segment grew by 29 percent, its industrial sales improved by 13 percent, and its broadband intake expanded by 8 percent.

Tan attributed the firm’s FQ1 success to lessons it learned during the COVID-19 prompted chip factory shutdowns last year. He indicated the supply chain disruptions of that period taught it to closely examine its order backlog and recognize real changes in end-market buying patterns. It used that information to adjust its operations in a way that balances supply and demand more effectively.

Broadcom’s 2021 Component Supplies 90 Percent Booked

Broadcom anticipates bringing in $6.5 billion in FQ2 2021, a meaningful upgrade on the $5.51 billion it made in FQ2 2020. If the company meets its earnings target, it will also top market analysts’ expectations of $6.33 billion.

Tan revealed the corporation has an optimistic outlook because almost 90 percent of its 2021 component supplies are booked. The executive acknowledged the flood of orders it received indicates the firm’s customers are stocking up to protect themselves from the impact of the global chip shortage.

The crisis began after the automotive sector recovered quicker than anticipated from the impact of the coronavirus pandemic. Unfortunately, the new demand wave hit just as pure-play foundries had dedicated their production lines to support consumer electronics OEMs ahead of the holiday season. The world’s contact chipmakers are working to address the vehicle parts shortfall. But that shift has constrained production capacity and raw materials for all other segments.

Reports have emerged that Broadcom’s lead times have grown to 50 weeks for certain products. In addition, its delivery dates for optocouplers and industrial fiber components have been extended to 20 to 30 weeks.

Tan argued that spiking interest for the manufacturer’s products is not a sign of a forthcoming semiconductor glut. He said his company’s bookings are non-cancelable, so double ordering has not driven its recent gains. The executive suggested that the strong order activity it experienced even with protracted lead times means the demand is real.

If Broadcom continues managing its fulfillment operations well, it should have a very profitable 2021.

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