Tech Stock to Watch: Broadcom Inc.(NASDAQ: AVGO)

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Broadcom Inc.(NASDAQ:AVGO) stock rose over 2%  on June 4th, 2021 (as of 12:09:52 UTC-4 · USD; Source: Google finance) as the company forecast third quarter revenue above Wall Street expectations, as the semiconductor firm is set to benefit from the rising adoption of 5G technology. As the global roll-out of 5G ramps up, strong demand for higher-priced chips used in smart phones will benefit Broadcom, which counts iPhone maker Apple Inc as a major customer. Networking grew 10% year on year and represented 32% of the semiconductor revenue. The revenue for switching was up 30% year on year, mainly driven by the strong ramp of the Trident and Tomahawk 3 for over 400G platforms and hyper cloud data centers. In the network, service providers have been investing in 5G infrastructure worldwide, where the demand for Jericho2 at the metro core and Qumran at the edge have been robust with revenue up 35% year on year. The enterprise demand in networking has not yet recovered, still down double digits from a year ago. Wireless Q2 revenue was down 16% sequentially, reflecting seasonality, with wireless representing 34% of semiconductor revenue mix. However, on a year-over-year basis, wireless revenue was up 48%, reflecting a very favorable compare year on year, as well as content increases in FBAR and WiFi.

Moreover, the gross margins for the semiconductor solutions segment were approximately 69%, up 290 basis points year on year, driven primarily by higher product margins. This margin improvement comes from content growth as we deploy more next-generation products in broadband and networking end markets.

AVGO in the second quarter of FY 21 has reported the adjusted earnings per share of $6.62, beating the analysts’ estimates for the adjusted earnings per share of $6.44. The company had reported the adjusted revenue growth of 15 percent to $6.61 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of $6.51 billion.

Additionally, the company has declared a quarterly cash dividend on its common stock of $3.60 per share. The company has also approved a quarterly cash dividend on its 8.00% Mandatory Convertible Preferred Stock, Series A, of $20.00 per share. . During the quarter, the company had made $1.5 billion in payments on debt obligations, ending the quarter with $9.5 billion of cash and $40.4 billion of total debt, of which $278 million is short term.

The company, which makes chips for data centers and servers, estimates third-quarter revenue to be about $6.75 billion, compared with analysts’ estimates of $6.6 billion, according to Refinitiv IBES data.

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