Enterprise IT Spending Still ‘Very Much Holding,’ Says Broadcom CEO

Though consumer tech hardware spending “has been reported to be weak, very weak,” infrastructure and enterprise spending, “from our vantage point,” is “very much holding,” said Broadcom CEO Hock Tan on an earnings call Thursday for fiscal Q3 ended July 31.

Broadcom’s net revenue growth of 25% in the quarter to $8.46 billion was driven by “robust demand” across cloud, wireless service providers and enterprise computing, said Tan. Semiconductor revenue increased 32% year on year to $6.6 billion and infrastructure software revenue grew 5% to $1.8 billion, he said: “We expect solid demand across our end markets to continue in the fourth quarter, reflecting continued investment by our customers of next generation technologies in data centers, broadband and wireless."

Revenue in Broadcom’s broadband sector grew 20% year on year to $1.1 billion, “in line with our expectations,” and was 17% of semiconductor sales in the quarter, said Tan. “This steady growth was driven by major service providers continuing to deploy next generation broadband fiber to the home globally, with high attach rates of Wi-Fi 6 and 6E,” he said. Broadcom expects the first Wi-Fi 7 deployments in the second half of 2023 in home gateways, “enterprise access points” and smartphones, he said.

Broadcom’s Q3 wireless revenue of $1.6 billion generated a quarter of its semiconductor sales, said Tan. “Sustained demand from North American customers drove wireless revenue up 14% year on year, in line with our guidance,” he said. In Q4, “we expect wireless revenue to be seasonally up 20% sequentially and to grow 10% year on year,” he said.

Broadcom is making “good progress” on its proposed $61 billion VMware buy for cash and stock (see 2205260013), “with our various regulatory filings around the world,” said Tan. Broadcom continues to expect the transaction to be completed during its fiscal year ending October 2023, he said.

The “short answer is no,” said Tan, when pressed to explain whether the weakness in consumer tech demand was spilling over into Broadcom’s enterprise sectors, as companies like Dell and HP have reported in recent earnings calls. “What we reported to you today, and you see the numbers that we're presenting and the strength of the numbers,” represents “true end demand that we're seeing,” he said.

Broadcom draws about 13% of its semiconductor revenue from China, said Tan. “That’s our exposure.” No Broadcom products are affected by the COVID-19 lockdowns in Chengdu that were imposed in recent days, he said: “We have not been affected, period, and we do not expect to be.”