Broadcom's Chips for Data Centers Offset Smartphone Weakness

Broadcom reaffirmed its revenue forecast for the current period and reported profit that beat estimates, according to Bloomberg. The report is indicating robust sales of chips used in data-center networks are helping to make up for lackluster demand in the smartphone business.

Broadcom’s net income was $3.73 billion, or $8.33 a share, in the quarter ended April 30, compared with $464 million, or $1.05 a share, a year earlier. Revenue rose 20 percent to $5.01 billion. Profit minus certain items was $4.88 a share. That compares with an average analyst estimate of $4.68 per share on sales of $5 billion.

The company had updated its predictions on April 30 to indicate sales of about $5 billion for the fiscal second quarter and projected $5.05 billion, plus or minus $75 million, for the current quarter. Analysts had projected sales of $5.06 billion.

Broadcom CEO Hock Tan has almost tripled the company’s revenue since 2015, mostly through acquisitions. He returned to discussing fluctuations of the electronics market after a failed attempt to expand further through the acquisition of Qualcomm. As more companies use data to fuel their businesses, Broadcom’s strength in chips that help run corporate networks and data centers is keeping orders rolling in.

“Our overall business remains robust and stable,“ Tan said on a conference call. In the current period, the company is expecting wireless revenue to be unchanged or “maybe even decline“ while growth in wired infrastructure sales will continue, he said.

Tan and his management have said that they don’t expect future acquisitions to weigh heavily on the company’s balance sheet, which suggests they don’t plan to pull off more large-scale deals. The company hasn’t abandoned the idea of future purchases and won’t settle for plowing cash into stock repurchases. Broadcom is still looking for acquisition targets, Tan said.