Chip giant Broadcom announces strong results and $10 billion buyback plan shows confidence in the future of the market

On Thursday, US semiconductor giant Broadcom unveiled results for the fourth quarter of 2021, guidance for the first quarter of 2022 and a dividend plan. Not only are the results strong, but Broadcom also announced a big buyback of up to $10 billion, indicating the company's confidence in continued demand in the semiconductor market in the future.

The strong earnings data also boosted confidence, with the company's shares up nearly 6 per cent in after-hours trading.

Revenue rose 15 per cent year-on-year to $7.41 billion in the quarter ended October 31, slightly above analysts' expectations of $7.36 billion; net profit in the fourth quarter was $1.989 billion; and adjusted EPS was $7.81in the fourth quarter, above analysts' expectations of $7.77, according to the results.

In addition to its core semiconductor business, Broadcom has diversified into the high-margin software sector. From a departmental perspective, revenue from semiconductor solutions in the fourth quarter was $5.63 billion, up 17% from a year earlier, and analysts expected $5.61 billion. Revenue from the infrastructure software division rose 8 per cent year-on-year to $1.77 billion.

Broadcom expects first-quarter revenue of $7.6 billion, well above analysts' expectations of $7.23 billion. The adjusted EBITDA for the first quarter is expected to be about 61.5 per cent of projected revenue.

Broadcom recorded record results in the fourth quarter, driven by a rebound in its enterprise business and continued strong demand from cloud and service providers. As we focus on strategic customers, our infrastructure software growth continues to be stable, "said Hock Tan, President and CEO of Broadcom." with the strength and breadth of our intellectual property portfolio, we will continue to provide leading, best-in-class semiconductor solutions and expand our leading position in the franchise market. "

Analysts point out that short-term demand for Broadcom's RF and wireless chips will continue to be strong as telecoms companies invest more money in the launch of 5G technology and the strength of its broadband division. The company's main customers include smartphone giants Apple and Samsung Electronics.

Broadcom will also benefit from higher demand for its data centres and server chips, thanks to the rise of hybrid working models and the rapid shift to cloud computing during the epidemic.

The company also announced a buyback plan of up to $10 billion, valid until the end of next year, and will raise its quarterly dividend to $4.10 a share, higher than analysts' expectations of $4.

Kirsten Spears, chief financial officer of Broadcom, said: "the launch of the new share buyback programme reflects the board's confidence in Broadcom's strong cash flow and provides us with a supplementary tool to deliver value to shareholders."