Broadcom (AVGO) Q2 2024 earnings summary

Executive summary

• Q2 FY24 consolidated net revenue reached $12.5B, up 43% year-over-year, driven by AI demand, VMware contribution, and strong networking; organic revenue growth excluding VMware was 12%.

• Non-GAAP net income was $5.4B; GAAP net income was $2.12B, down from $3.48B prior year due to higher amortization, stock-based compensation, and restructuring costs from the VMware acquisition.

• Completed the $86.3B VMware acquisition and a $600M SoC asset purchase from Seagate.

• Announced a ten-for-one forward stock split, effective July 2024.

• Quarterly dividend of $5.25 per share approved, with $2.44B paid in Q2.

Financial highlights

• Gross margin for Q2 was $7.78B (62% of revenue, down from 70% year-over-year); non-GAAP gross margin was $9.52B.

• Operating income was $2.97B (GAAP, down 26% year-over-year); non-GAAP operating income was $7.15B.

• Adjusted EBITDA for Q2 was $7.4B, 59% of revenue, up 31% year-over-year.

• Free cash flow for Q2 was $4.45B, or 36% of revenue.

• Ended Q2 with $9.8B in cash and $74B in gross debt.

Outlook and guidance

• FY24 revenue guidance raised to $51B, with Adjusted EBITDA margin expected at 61%.

• AI revenue for FY24 expected to exceed $11B, with non-AI semiconductor revenue having bottomed in Q2 and modest recovery anticipated in H2.

• VMware revenue expected to accelerate toward a $4B per quarter run rate, with operating margins converging to classic software levels by FY25.

• Additional restructuring and integration costs from the VMware Merger are anticipated through fiscal 2025.

• Capital expenditures are expected to be higher in fiscal 2024 versus 2023.