Broadcom Profit Outpaces Revenue as Margins Expand

Broadcom's fiscal third quarter demonstrated a significant divergence between revenue and profit growth, with net income climbing 127% to $29.3 billion against a 32% increase in trailing-12-month revenue to $75.5 billion. This earnings acceleration, nearly four times the pace of revenue expansion, was underpinned by a notable improvement in operating margins.

For the fiscal first quarter ending May 3, Broadcom posted revenue of $22.2 billion, up 48% year-over-year, while net income rose 88% to $9.3 billion. Operating margin expanded from approximately 39% of revenue in the prior year to 44% in the fiscal first quarter, and further to nearly 49% in fiscal Q2. This trend continued with margins expanding from 57% to about 62% on 79% revenue growth in fiscal Q2. The company's gross margin stood at 65.66%.

Operating expenses rose about 6% year-over-year to $4.6 billion, with research and development spending up 11%. Selling, general and administrative costs increased by 13% year-over-year. AI is projected to contribute revenue up more than 200% year-over-year.

Notably, Broadcom reported a $1.9 billion net loss under GAAP in the fiscal third quarter of 2024, attributed to a $4.5 billion noncash tax charge related to an intellectual property transfer. Excluding this charge, the company saw a substantial profit increase.