Broadcom (Nasdaq: AVGO) was higher following the company's fiscal Q1 earnings report which showed it beating expectations on the top and bottom-line. It marked its 5th straight quarter of beating earnings and revenue expectations.
AVGO is one of the world's largest chipmakers that has benefitted from the semiconductor boom over the last decade which accelerated over the last couple of years. The company has been seeing rising margins as of late with its software business becoming a larger share of revenue which also bodes well.
Overall, AVGO is down by 15% from it's all-time highs a couple of months ago. Over the last decade, it's up 1,380% which doesn't include its dividend payouts. And since the March 2020 market bottom, the stock is up 144%.
Inside the Numbers
In its fiscal Q1, Broadcom reported adjusted earnings per share of $8.39 which was a 27% increase from last year and above analysts' expectations of $8.13 per share profit. Revenue came in at $7.71 billion, above expectations of $7.6 billion and a 16% increase from last year.
For its fiscal Q2, the company is forecasting $7.9 billion in revenue which equates to a 20% gain and above expectations of $7.4 billion in revenue. This also indicates an acceleration in revenue and a sign that tech spending continues to be strong in 2022.
The company attributed its outperformance to strong enterprise demand and increased spending for next-generation technologies by hyperscale and service providers.
For the quarter, semiconductor products accounted for 76% of revenue, while infrastructure software contributed the other 24%. Broadcom's chips are used in the Apple (NASDAQ: AAPL) iPhone as well as networking and storage products. Its software is used for mainframes, data centers, and cybersecurity.
Due to Broadcom's growing software business, the company's operating margins have been expanding. This also bodes well for its stock price which remains attractive despite recent gains. The company has a forward P/E of 16 which is cheaper than the S&P 500 (NYSE: SPY) despite a faster growth rate, cheaper valuation, generous 2.8% dividend, and 23% profit margins that should keep growing.