Broadcom and Marvell deliver solid financial results, but doubts persist over long-term outlook

Semiconductor firm Broadcom Inc. once again beat expectations as it delivered its first quarter financial results, and offered a forecast for the next quarter that also came in above analysts’s estimates. However, it declined to offer long term guidance, and its stock stayed flat in after-hours trading.

Still, Broadcom’s stock fared much better than that of its industry peer Marvell Technology Inc. The rival chipmaker’s shares fell more than 8% in extended trading after officials blamed “inventory corrections” for a weak outlook for the coming quarter.

Broadcom delivers again

Broadcom reported a first quarter net income of $3.77 billion, with earnings before certain costs such as stock-based compensation coming to $10.33 per share, up from $8.33 per share a year earlier. Revenue for the period rose 16% from a year ago to $8.91 billion.

The results were impressive, with Wall Street forecasting earnings of just $10.17 per share on sales of $8.9 billion.

Broadcom’s stock has held up far better than its peers in the chipmaking industry, which has endured a rollercoaster ride over the past few years. During the COVID-19 pandemic, a global shortage of chips resulted in a massive windfall for chipmakers. However, over the last year that shortage has transformed into a glut, as macroeconomic forces negatively impact consumer and business spending.

Broadcom showed that, despite regularly meeting expectations, it is not immune to the problems affecting the chup industry, as it only offered a limited outlook and also declined to update analysts on its product backlog.

For the second quarter, Broadcom said it’s guiding for revenue of around $8.7 billion, just ahead of Wall Street’s forecast of $8.58 billion. But just as he did three months ago, Broadcom Chief Executive Hock Tan (pictured) again declined to make a full annual forecast.

“Broadcom’s first quarter performance reflects continued strength in infrastructure demand across all our end markets,” Tan said in a statement. “Looking ahead, we are confident our growth will be driven by sustained leadership in next generation technologies across all of our core markets, and strong partnerships with our customers.”

One of the reasons that Broadcom has proven to be relatively immune from the chipmaking sector’s doldrums is that it has successfully diversified its business beyond semiconductors. In addition to chips, it also sells enterprise-grade storage systems and networking gear, and has a software unit that was formed after it acquired CA Technologies Inc. and Symantec Inc. Broadcom is hoping to acquire VMware Inc. and add it to its software division later this year.

Broadcom’s chipmaking unit, which includes the storage and networking segments, delivered $7.1 billion in revenue, up 21% a year earlier and beating the consensus estimate of $7 billion. The software unit delivered sales of $1.81 billion, down 1%.

Marvell’s weak outlook disappoints

The difficulties plaguing chipmakers at the moment were only too evident when Marvell delivered its fourth quarter results and forecast for the coming quarter.

Marvell posted a loss of $15.4 million, down from a net income of $6.2 million a year earlier. Its earnings before certain costs such as stock compensation came to 46 cents per share, in-line with analysts’ estimates. Revenue rose 6% to $1.42 billion, just ahead of the $1.4 billion forecast.

However its outlook came in far lower than analysts were expecting. The company said it’s looking at $1.3 billion in revenue, below the consensus estimate of $1.38 billion. It also forecast earnings before certain costs such as stock compensation of 29 cents, well below Wall Street’s forecast of 42 cents.

“While inventory corrections and resulting changes in product mix are impacting our guidance for fiscal first quarter revenue and gross margin, we expect these headwinds to subside later in fiscal 2024, as inventory levels normalize, and Marvell-specific growth drivers accelerate,” Marvell CEO Matt Murphy said in a statement.

Marvell’s stock has fallen 32% over the last 12 months, while the S&P index has declined just 9% over the same period.

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