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Will Broadcom’s Q1 Revenues Meet Analyst Estimates?

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What is different about Broadcom’s upcoming earnings?

Previously, we saw that Broadcom (AVGO) is in the limelight, as it is set to announce its fiscal 2019 first-quarter earnings on March 14. These earnings will be different from its previous earnings as they will integrate the earnings of enterprise software company CA Technologies, which it acquired in November 2018. This acquisition will change the reporting to two business segments—Semiconductors Solutions and Infrastructure Software—from the earlier four segments of Wireless, Wired, Enterprise Storage, and Industrial.

Fiscal 2019 first-quarter revenue

Broadcom’s fiscal 2018 revenue rose 18% YoY, as it included full-year sales of Brocade Communications. Broadcom expects its fiscal 2019 revenue to rise 17% YoY to $24.5 billion, as it expects CA Technologies’ acquisition to add $5 billion to annual revenue.

Broadcom didn’t provide guidance for the first quarter of fiscal 2019, but Cowen analyst Matthew Ramsay expects the company’s revenue to rise 9.5% YoY to $5.83 billion for the quarter. According to Investor’s Business Daily, Matthew Ramsay downgraded Broadcom from “outperform” to “market perform,” stating that tough macroeconomic conditions in the company’s key markets of smartphones and hyperscale cloud will impact its earnings in the first half of 2019.

Matthew Ramsay stated that Broadcom earns more than 50% of its wireless revenue from Apple (AAPL) and 75% of its overall revenue from smartphone and hyperscale cloud. Apple reported a 15% YoY decline in iPhone revenue in the December 2018 quarter. Intel (INTC) reported slow revenue growth in its data center and modem businesses in the fourth quarter of 2018. Intel is the sole modem supplier for Apple.

It remains to be seen if Broadcom’s Infrastructure Software business can mitigate the impact of weak smartphone sales. Next, we will look at the companies’ business segments.

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