Broadcom recently announced it grew its fiscal fourth-quarter revenue by 12 percent from the same period in 2019. The San Jose, California-based chipmaker attributed its strong performance last period to healthy demand from its networking, telecom, and wireless customers.
The corporation also offered a forecast for the fiscal fourth quarter of 2021 that indicates double-digit sales growth. However, the firm cautioned investors that softness in the enterprise chip segment would negatively affect its near-term income.
Broadcom’s FQ4 Income Boosted by COVID-19 Related Demand, iPhone 12 Launch
In the three months ending November 1, Broadcom made $6.46 billion, an improvement on the $5.77 billion it generated in FQ4 2019. The company also reported net income of $1.32 billion, or adjusted earnings per share (EPS) of $6.35. That means the chipmaker expanded its quarterly profit by 56.3 percent and its EPS by 17.8 percent.
The fabless manufacturer’s intake also exceeded Wall Street’s consensus expectations, which pegged its sales at $6.43 billion and earnings of $6.25.
In an earnings call, Broadcom discussed the factors that drove its meaningful FQ4 growth. The firm saw a 35 percent jump in its networking revenue and a 22 percent spike in its broadband sales. Those segments of the company’s business likely benefited from corporations and online service providers needing new networking gear to accommodate the rise in online activity that followed the coronavirus pandemic.
Since it counts Google, Amazon, and Microsoft as customers, it was well-posited to benefit from the recent digitalization trend.
That said, Broadcom’s wireless segment experienced the biggest year-over-year positive change in FQ4, growing by 43 percent. Since the firm supplies Apple with Wi-Fi chips, the iPhone 12 line’s launch probably bolstered its income.
The manufacturer’s October period revenue success is an object lesson in the importance of maintaining a diverse product portfolio.
Softness in the Enterprise Chip Market
Broadcom anticipates making $6.6 billion in the current period, which would be a 13 percent year-over-year uptick in sales. Market analysts believe the chipmaker’s FQ1 2021 intake will total a slightly less robust $6.5 billion. Although the firm issued a positive near-term outlook, it believes demand for its enterprise products will contract.
Tan told investors Brocade Communications System, a Broadcom subsidiary that produces corporate switching and storage solutions, will see a high single-digit drop in sales this quarter.
Shortly after the COVID-19 outbreak began, leading cloud computing providers purchased large quantities of components to reinforce their networks. Mark Russinovich, CTO of Microsoft Azure, said his organization rushed to build out its digital infrastructure after being hit with a wave of “unprecedented demand.” However, businesses have had months to adapt to post-pandemic conditions and have adjusted their stock levels accordingly.
If that is the case, the entire global enterprise chip market may decline in FQ1 2021.
Nevertheless, Broadcom looks to be in good shape heading into the New Year. The firm’s chief executive said interest in its other products would make up for its declining corporate component revenue. In addition, the company recently came to terms with the European Union following a year-long antitrust investigation.
Free of regulatory scrutiny, the chipmaker can direct all its focus toward growing its sales in the present period and beyond.