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Broadcom (AVGO) to Report Q1 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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Broadcom AVGO is scheduled to release first-quarter fiscal 2021 results on Mar 4.

For first-quarter fiscal 2021, the company anticipates revenues of $6.6 billion. The Zacks Consensus Estimate is currently pegged at $6.61 billion, indicating an improvement of 12.8% from the year-ago quarter.

We note that the Zacks Consensus Estimate for earnings has been stable in the past 30 days at $6.55. The figure suggests growth of 24.8% from the prior-year reported figure.

Factors Likely to Have Influenced Q1 Performance

Robust adoption of Wi-Fi 6 in next-generation access gateway, courtesy of solid demand from enterprises, telcos and other service providers, is expected to have contributed to revenue growth across the broadband end market in the fiscal first quarter.

In fact, during the quarter under review, Broadcom disclosed that its BCM4389 chip is being leveraged by Samsung for its Wi-Fi 6E phone —Samsung Galaxy S21 Ultra.

Broadcom Inc. Price and EPS Surprise

Broadcom Inc. Price and EPS Surprise
Broadcom Inc. Price and EPS Surprise

Broadcom Inc. price-eps-surprise | Broadcom Inc. Quote

Besides, Broadcom, currently carrying a Zacks Rank #3 (Hold), may have benefited from recovery witnessed in industrial and auto segments. This is expected to have bolstered growth in the quarter under review.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, a solid uptick of DSL and PON and next-generation cable DOCSIS 3.1 products, and the latest enterprise and residential suite of Wi-Fi 6E-compliant solutions is expected to have benefited the top-line performance in the fiscal first quarter.

Also, incremental adoption of SmartNIC adapters, which enable cloud players to accelerate dynamic workloads in a cost-effective manner in a secure infrastructure, is anticipated to have contributed to Semiconductor solutions’ revenues in the quarter under review.

Notably, the Zacks Consensus Estimate for the Semiconductor solutions segment’s revenues for the fiscal first quarter is pegged at $4.92 billion, suggesting growth of 17.4% on a year-over-year basis.

Nevertheless, growth might have been limited by decline in video, particularly in satellite set-top boxes, amid the coronavirus pandemic-led constraints on live sporting events. Also, increasing lead times may have impacted results.

Broadcom’s fiscal first-quarter performance is likely to reflect synergies from the buyouts of CA and Symantec’s enterprise security business. This is anticipated to have aided Broadcom’s Infrastructure software revenues in the fiscal first quarter.

Markedly, Symantec’s enterprise security business contributed $380 million to revenues in fourth-quarter fiscal 2020. Moreover, revenues from CA improved 5% on a year-over-year basis.

Further, the coronavirus crisis-induced work-from-home trend may have favored the adoption of cloud-based infrastructure software solutions, which is likely to get reflected in the to-be-reported quarter’s top line.

However, revenues from Brocade are expected to witness decline in high single digits compared with year-ago quarter due to sluggish enterprise spending.

Notably, the Zacks Consensus Estimate for the Infrastructure Software segment revenues for the fiscal first quarter is pegged at $1.691 billion, indicating year-over-year growth of 1.4%.

Key Developments in Q1

During the fiscal first quarter, Broadcom announced the general availability of 7 nanometer (nm) 800G PAM-4 PHY devices. These devices will enable cloud services providers and data center operators to develop high bandwidth 800G infrastructure networks.

The chipmaker also rolled out Trident SmartToR (Smart Top-of-Rack) solution that leverages software-defined pipeline and covers switching, routing, and advanced L4-L7 network services.

Further, it began shipping of Tomahawk-50G (BCM56990) in volume. Also, the company expanded its portfolio of 25.6 terabits per second StrataXGS Tomahawk 4 router chips.

Although product development initiatives bode well over the longer haul, increasing expenses on debt financing for acquisitions amid stiff competition from peers, including Qorvo QRVO, Skyworks SWKS and Marvell MRVL, in the semiconductor market are anticipated to have weighed on the fiscal first-quarter margins.

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