Broadcom (AVGO) shares moved higher Friday after the chipmaker posted better-than-expected fourth quarter earnings and a solid near-term outlook as business spending on broadband and IT infrastructure continues to expand.
Broadcom's adjusted earnings of $10.45 per share topped Street forecasts by around 17 cents, while revenues rose 21% to an analyst-beating $8.93 billion. Broadband revenues grew 20% from last year -- but slipped from the prior quarter to $1.1 billion while its relationship with Apple (AAPL) again helped wireless revenues rise 13% to $2.1 billion.
Looking into the coming fiscal year, Broadcom also said it sees adjusted earnings of around $5.94 per share for the current quarter, with revenues flat to the prior period at $8.9 billion.
"What we see now, last quarter and this current quarter as we progress is hyperscale spending continues strong," CEO Hock Tan told investors on a conference call late Thursday. "Enterprise consumption continues strong. And broadband deployment across North America, Europe and even parts of Asia continues their multiyear trend of growth."
"I do not know whether the strength in acquisition and consumption of our products will continue to sustain for the rest of '23," he added. "What we do see is over the next several months, we see those orders still in place. We see customers willing to take the products."
Broadcom shares were marked 3.3% higher in early Friday trading to change hands at $549.16 each, a move that would trim the stock's year-to-date decline to around 16%.
"Broadcom did not provide guidance or update its backlog, which previously stood at $31 billion last quarter, but indicated that it is fully booked out for the year with non-cancelable backlog and expects to grow," said KeyBanc Capital Markets analyst John Vinh, who carries an 'overweight' rating with a $700 price target on the stock.
Broadcom's Tan also repeated that the group was making progress with regulators on its $61 billion acquisition of VMWare (VMW), the former cloud computing division of Dell Technologies (DELL), and expects the deal to close in the coming fiscal year.
The chipmaker has said it it will maintain its current dividend policy of delivering 50% of its prior-year free cash flow to shareholders, despite the VMWare acquisition, which includes Broadcom's assumption of around $8 billion in VMware debt.
Broadcom shareholders will own around 88% of the company when the deal is complete, with VMware holding the remaining 12%.
"The combination of Broadcom and VMware is about enabling enterprises to accelerate innovation and expand choice by addressing their most complex technology challenges in this multi-cloud era, and we are confident that regulators will see this when they conclude their review," Tan said.
