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Data Centers Drive Broadcom’s Wired and Storage Revenue

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Broadcom’s business segments

Weakness in the wireless market is offsetting Broadcom’s (AVGO) revenue growth from other segments. The company earned 40% of its fiscal first-quarter revenue from its wireless segment, 35% from its wired segment, 18.6% from its enterprise storage segment, and 4.7% from its industrial segment.

Wired infrastructure

The wired segment earns revenue from data center networking, which generates stable earnings. Broadband, which caters to the consumer segment, is exposed to seasonality. Overall demand has been strong in the networking infrastructure space as enterprises and the cloud transition to higher capacity.

Broadcom’s wired revenue fell 12.6% sequentially in the first fiscal quarter. However, as the company stated that data center demand was strong in the second fiscal quarter, its wired revenue is expected to grow 3% sequentially to $1.9 billion during that period.

Rival Intel’s (INTC) data center segment reported better-than-expected seasonal revenue in the first quarter, with networking and communications revenue rising 33% YoY (year-over-year) as carriers opted for AI-based solutions to virtualize their networks in preparation for the 5G (fifth-generation) transition.

Enterprise storage

Enterprise storage offers SSD (solid-state drive) flash controllers and other storage solutions. In the first fiscal quarter, the segment’s revenue rose 53.6% sequentially to $991 million as Broadcom integrated Brocade’s business.

Broadcom is witnessing strong demand from data center customers, and Micron (MU) is seeing strong enterprise SSD adoption. In the second fiscal quarter, Broadcom’s enterprise storage revenue is expected to grow 3% sequentially to ~$1.0 billion.

Broadcom is making new developments in the storage space. It has launched the industry’s first end-to-end NVMe[1.non-volatile memory]- over-fiber-channel storage solution in collaboration with NetApp and SUSE. The channel is scalable, making it ideal for AI and machine-learning applications.

Industrial

Broadcom has yet to expand its industrial segment, whereas rival Texas Instruments (TXN) has already expanded this segment and reported strong growth in the space. Next, we’ll look at Broadcom’s profitability.

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