Broadcom Stands Firm Despite Semiconductor Downturn

[Asia Economy Reporter Minji Lee] Broadcom is expected to show improved performance thanks to better front-end demand compared to other semiconductor companies. Analysts also note that its investment appeal has increased as the company mentioned plans to further increase its dividend size.

On the 11th, Broadcom's stock price was $544.72, rising 1.29% over the past week. During the same period, the Philadelphia Semiconductor Index fell by more than 1.3%. The upward trend reflected expectations for improved earnings and expanded dividends.

Broadcom's Q4 (August to October) revenue was $8.9 billion, a 20.6% increase compared to the same period last year. Revenue from the semiconductor solutions segment, which accounts for nearly 80% of total sales, reached $7.09 billion, up 26% year-over-year. The infrastructure software segment (21% of sales) posted revenue of $1.84 billion, a 4% increase. R&D expenses were $1.2 billion, below the market expectation of $1.3 billion. Capital expenditures were $120 million, in line with market expectations. Within the semiconductor solutions segment, networking business revenue increased 8% quarter-over-quarter due to strong demand for edge computing, and wireless revenue surged 31% in the same period, influenced by the new iPhone launch. Park Yu-ak, a researcher at Kiwoom Securities, said, “The backlog of semiconductor product orders remains strong, and there have been no cancellations from customers. Among major front-end industries, networking, server and storage, and wireless sectors continued their growth compared to the previous quarter.”

The guidance revenue for Q1 next year (November to January) is $8.9 billion, exceeding the market expectation of $8.8 billion. In the semiconductor networking segment, a 9% revenue decline is expected quarter-over-quarter due to the off-season effect, but this will be offset by an 18% increase in broadband revenue entering the peak season. Wireless revenue guidance is expected to decrease by 5% quarter-over-quarter, as the reduction in distribution inventory within the smartphone market appears to have slowed. Considering this, semiconductor solutions segment revenue is expected to maintain the previous quarter’s level, showing a better-than-expected performance compared to market concerns.

Unlike other semiconductor companies, Broadcom’s strong performance is attributed to its conservative product sales even during the upcycle. The company emphasized, “The order backlog is actually increasing, and lead times are not shortening.” Researcher Park Yu-ak said, “Market demand outside of China is better than investors’ concerns. Investor worries about semiconductors are excessive compared to the actual market conditions, so increasing exposure to the semiconductor sector is positive.”

Another investment point for Broadcom is its expansion of shareholder returns. Since initiating dividends in 2011, the company has increased dividends every year, and it set an annual dividend target of $18.40 for next year. Additionally, the company announced plans to resume share repurchases worth $13 billion. Researcher Junho Moon of Samsung Securities analyzed, “Considering that the company delivers stable earnings and cash flow even during downcycles and connects these to shareholder returns, its valuation is not burdensome. Attention should be paid to the fact that it is still trading at more than a 20% discount compared to the Philadelphia Semiconductor Index.”

This content was produced with the assistance of AI translation services.