On Thursday, chipmaker Broadcom made its financial disclosures for the fiscal fourth quarter and offered projections for its 2020 financial performance. Notably, the company outpaced Wall Street analysts’ forecasts in terms of both revenue and profitability. Moreover, recent developments in international trade suggest that the company’s near-term economic outlook may be even better than expected.
Broadcom’s Q4 Results
In the period ending November 3, Broadcom generated $5.78 billion in revenue. Comparatively, market analysts pegged the firm’s last quarter sales at $5.73 billion. Besides, the semiconductor maker recorded a Q4 profit of $5.39 per share in Q4. Wall Street forecast the company’s income at $5.35 per share.
Notably, Broadcom increased its revenue by 4.7 percent and its profits by 5.06 percent from Q3 2019.
Market watchers attributed the firm’s better than expected performance to robust growth in its software segment. In August, the corporation diversified its holdings by acquiring Symantec’s enterprise business for $10.7 billion. Accordingly, the company saw that segment of its business increase of 134 percent year-over-year.
Broadcom’s 2020 Forecast
In the fiscal year 2020, Broadcom expects to generate $25 billion in revenue, plus or minus $500 million. The firm’s CFO Tom Krause said $18 billion of its sales would come from its semiconductor business. In particular, the corporation predicts its broadband, networking, and storage chip sales to reach $12 billion, a year-over-year increase of 7 percent.
The component manufacturer, which counts Apple and Samsung as clients, premised its forecast on strong sales of 5G handsets.
In November, Qualcomm estimated 225 million smartphones with fifth-generation networking capability would ship next year. Moreover, Bank of America Global Research recently reported Apple would maintain a 30 percent market share of 5G handsets through 2022. As such, Broadcom’s forecast of 2020 as a growth year is factually grounded.
Furthermore, the corporation’s core business might do better than expected next year due to the new U.S.-China trade deal. As part of the agreement, Washington agreed not to impose a further 15 percent import tax on Chinese-made electronics. The federal government is also considering reducing previously issued electronics component tariffs. Consequently, Apple won’t need to increase its price to compensate, meaning its holiday sales could be stronger than expected.
As a key Apple vendor, Broadcom would benefit from rising iPhone shipping in the United States.
In addition, Broadcom lowered its FY19 estimate by $2 billion in June because of the trade war. With the conflict seemingly resolved, the company could experience a significant decrease in sourcing costs. Therefore, the corporation may be able to not only hit its $25 billion revenue projection but perhaps even exceed it.