Economy, Sci & Tech

Broadcom Sees Q4 Boost From Data Center Demand, iPhone Launch

Shares of Broadcom rose 4% to $224.90 in extended trading on Thursday.
Shares of Broadcom rose 4% to $224.90 in extended trading on Thursday.

Broadcom Inc on Thursday forecast current-quarter revenue largely above estimates on higher demand for components that power data centers, while the launch of Apple Inc’s new iPhones is expected to bolster its wireless business.

Shares of Broadcom rose 4% to $224.90 in extended trading after the chipmaker also reported third-quarter profit that topped analysts’ estimates, Reuters reported.

Revenue from enterprise storage business jumped 70% in the reported quarter as the acquisition of Brocade helped drive sales gains at the unit.

Its wireless business, which makes chips for Wi-Fi, Bluetooth, and GPS connectivity, reported flat revenue, while its wired infrastructure unit, which makes components used in telecommunication networks, posted a 4% rise from a year earlier.

“More than half our consolidated revenue ... is benefiting from strong cloud and enterprise data center spending,” Chief Executive Officer Hock Tan said on a post-earnings call with analysts.

“This, coupled with a seasonal uptick in wireless, will drive our forecast revenue in the fourth quarter.”

The company expects a ramp at its North American customer—which analysts identified as Apple—to drive a 25% rise in wireless revenue from the previous quarter, although it may be down in single-digit percentage compared with a year earlier. Apple is set to unveil its new iPhones next week.

Tan, who has transformed Broadcom into a $100 billion behemoth through a series of acquisitions, surprised Wall Street in July with his move to acquire software maker CA Technologies for $19 billion.

Explaining his rationale behind the CA acquisition, Tan said he planned to target the company’s enterprise customers with Broadcom’s offerings including server and storage connectivity products.

The CA deal comes after US President Donald Trump blocked Broadcom’s $117 billion offer to buy Qualcomm Inc on national security grounds.

Broadcom forecast current-quarter revenue of about $5.40 billion, plus or minus $75 million. Analysts on average were expecting revenue of $5.35 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to common stock rose to $1.2 billion, or $2.71 per share, in the quarter ended Aug. 5 from $481 million, or $1.14 per share, a year earlier.

Excluding items, the company earned $4.98 per share. Net revenue rose to $5.06 billion from $4.46 billion.

Analysts on average were expecting earnings of $4.83 per share on revenue of $5.07 billion.

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