Mizuho’s Vijay Rakesh joins 'TechCheck' to discuss Broadcom's earnings results. Rakesh explores the report and what Broadcom did well compared to competitors in the space. Sign up and learn more about the CNBC Investing Club with Jim Cramer [ Ссылка ]

Investing Club holding Broadcom (AVGO) reported strong fiscal fourth-quarter results Thursday after the closing bell. On the top line, revenue of $7.4 billion (+15% YoY) outpaced the $7.35 billion consensus. On the bottom line, diluted earnings of $7.81 per share (+23% YoY) edged out the $7.72 per share the Street was looking for.

“Broadcom concluded the year with record fourth quarter results driven by a rebound in enterprise, and continued strength from cloud and service provider demand. Our infrastructure software growth continues to be steady with our focus on strategic customers,” said CEO Hock Tan on the release. “With the strength and breadth of our IP portfolio, we continue to be able to uniquely deliver leading edge, best-in-class semiconductor solutions, and extend our leadership in our franchise markets.”

In addition to the headline results, adjusted gross margins of ~74.6% (+100bps YoY) edged out the 74.4% expected, while adjusted operating margin of ~59.2% (+290bps YoY) outpaced the 58.8% consensus.

Guidance & Capital Allocation

The strong results were met with equally strong guidance as management expects FY1Q22 revenue of ~$7.6 billion, well ahead of the $7.2 billion expected coming into the print. Profitability is also projected to be better than expected as management is guiding for a 61.5% adjusted EBITDA margin, versus a 60% margin consensus coming into the print.

All that in mind, what’s better than better than expected results and guidance that tops expectations? How about that plus a 14% increase to the common stock dividend and $10 billion buyback, both of which were announced in conjunction with the release and provide a sense of the confidence management has in the strength we saw in this release sustaining into the future!

Segment Results

Broadcom reports its earnings in two segments: Semiconductor Solutions and Infrastructure Software.

Starting with Semiconductor Solutions, revenue of $5.634 billion (+17% YoY) edged out the $5.627 billion consensus and represented 76% of total revenue. Segment gross margin expanded to 70% (+170bps YoY) “driven by favorable product mix and content growth in next-generation products” across the product portfolio. Moreover, Broadcom’s operating leverage was on full display as that 17% segment revenue growth led to a 24% increase in operating profit, as segment operating margin expanded to 56% (+350bps YoY). Looking ahead, the team expects the segment strength to continue and guided for revenue to once again grow 17% YoY. Excluding wireless, segment revenue is expected to increase 28% YoY.

Within the segment, Networking revenue advanced 13% YoY to $1.9 billion, representing 34% of segment revenue. On the call, Tan attributed the double-digit growth to strong campus switching, cloud and 5G infrastructure demand. Tan also called out strong demand for custom ASIC silicon solutions from hyperscale cloud customers, which now represent 20% of networking revenue and noted that the hyperscale footprint now extends beyond TPUs (which the company designs for customers such as Alphabet) and works with “multiple cloud customers.” Tan added that the sub-segment is “firing on all cylinders” in the current quarter with growth expected to accelerate to close to 30% YoY.

Server storage connectivity revenue jumped 21% YoY to $815 million, representing 15% of segment revenue. On the call, Tan called out continued share gains due to expanding leadership in next-gen products and a recovery in enterprise spending. Here too, management sees current quarter growth accelerating to ~30% on an annual basis.

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