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Broadcom CEO: Sacrificing revenue to avoid future oversupply

September 03, 2021


Juheng.com reported that last night, Broadcom announced its third-quarter financial report for the 2021 fiscal year, and its performance was better than market expectations.

Broadcom Chief Executive Officer Chen Fuyang (Hock Tan) said that corporate customers are accelerating the recovery, with strong performance in various businesses, and will maintain a double-digit annual growth rate in the fourth quarter. On the supply side, the company said it will continue to maintain a stable delivery time.


However, Broadcom seems to be cautiously facing potential excess inventory. When analysts asked Broadcom’s revenue growth to be lower than some of its peers, Chen Fuyang said that despite the surge in chip demand, the company is still strictly controlling which orders can be fulfilled. This idea is a sacrifice. Some current revenues to avoid an oversupply situation in the future.

Broadcom is one of the world's leading chip manufacturers, with products ranging from smartphone parts, network equipment parts to home WiFi device semiconductors. Its financial measurement is regarded as an indicator of the market's demand for future products from major technology companies such as Apple, Samsung, and Google. After the financial report was released, Broadcom's stock price changed little after the market, dropping 0.1% to $491.40 per share.

F2021 Q3 (as of 8/1) Key financial report data:

Net revenue was reported at US$6.778 billion, better than the US$6.76 billion expected in the Refinitiv survey

Non-GAAP EPS reported at US$6.96, better than the US$6.88 expected in the Refinitiv survey

Gross profit margin reported 75%, a single-quarter record

Adjusted EBITDA reported US$3.96 billion

Free cash flow (FCF) reported US$3.443 billion

Revenue is broken down by business:

Semiconductor solutions (chip sales) reported US$5.021 billion, an annual increase of 19%;

Infrastructure software reported 1.757 billion US dollars, a year-on-year increase of 10%.

Broadcom's third-quarter revenue increased by 16% annually to $6.778 billion. CEO Chen Fuyang said that the third quarter achieved record revenue, reflecting the long-term growth of products and technologies in the cloud, 5G infrastructure, bandwidth, and wireless transmission. Leadership in the market.

Chen Fuyang said that revenue growth was mainly driven by large-scale cloud and server customer demand, among which the wireless transmission business maintained its annual growth performance. The overall commercial demand is recovering, but the third quarter is still in the early stage of recovery, so the performance is lower than last year.

The financial report shows that network chip (accounting for about 36% of semiconductor solutions) revenue increased by 19% annually. Chen Fuyang said that the growth was mainly due to the expansion of 5G investment in the telecommunications industry and the acquisition of a significant proportion of the market share of data center Ethernet bridges. Enterprise demand is consistent with the previous quarter and has not returned to last year's level.

Broadband communications chips (approximately 18% of semiconductor solutions) revenue increased by 23% annually. The main driving force was the 100% growth of WiFi 6 deployment and the double-digit growth of optical fiber and DOCSIS 3.1 cable modems.

Revenue from wireless radio frequency chips (accounting for approximately 29% of semiconductor solutions) grew by 35% over the same period last year.

Storage and bridge chip business (accounting for approximately 13% of semiconductor solutions revenue) revenue decreased by 9% from the same period last year, mainly because the enterprise side is still in the early stage of recovery.

On the other hand, infrastructure software revenue was mainly driven by its Brocade communications optical fiber SAN products. Brocade revenue increased by 27% annually, and other software businesses increased by 6% annually.

Broadcom generated US$3.42 billion in free cash flow in the third quarter, accounting for 51% of revenue. It is expected that free cash flow in the fourth quarter will remain strong.