Broadcom Says Enterprise Spending 'On Fire,' Forecasts Upbeat Revenue

The Broadcom Limited company logo is shown outside one of their office complexes in Irvine, California, U.S., March 4, 2021. REUTERS/Mike Blake

Chip company Broadcom Inc on Thursday forecast second-quarter revenue above Wall Street estimates on the back of strong demand from enterprise and cloud clients, and the ramp-up in 5G technology.

“Enterprise spending is on fire … and we are seeing a big part of that,” Broadcom’s chief executive, Hock Tan, told analysts on a conference call. He said that the sector has been recovering strongly from a “trough” in the first quarter of last year.

Broadcom forecast current-quarter revenue of about $7.9 billion, compared with analysts’ average estimate of $7.43 billion, according to IBES data from Refinitiv.

Shares of the San Jose, California-based company rose about 2% in extended trading. So far this year they have declined about 12% amid a rout in tech stocks.

Broadcom’s chief financial officer, Kirsten Spears, told analysts that the company’s hardware had an order backlog of over $25 billion at the end of the quarter compared with $22 billion in the previous quarter.

“This paints a picture for continued strong demand to continue throughout the year,” said Logan Purk, analyst at Edward Jones.

Broadcom, which counts Apple Inc as a major customer, is also poised to gain from the global rollout of 5G wireless technology, which is likely to boost demand for its chips used in handsets, telecom equipment and other devices.

“We think most of Broadcom’s end-markets and major customers’ demand remain healthy in the near term,” said Kinngai Chan, analyst at Summit Insights Group.

“Our checks, however, do indicate some double ordering by its customers and expect demand to begin to normalize in 2H22 as supply improves.”

Adjusted revenue for the quarter ended Jan. 30 was $7.71 billion, up 16% year-on-year and slightly higher than Wall Street’s expectation for $7.60 billion.