Semiconductor company Broadcom has reported steady Q3 results, with revenue of $5.82bn marking a 5.6% year-over-year rise.

Net income for the quarter ended 2 August was $614m, compared with $715m in the year-ago period. Earnings per share for the Q3 fiscal year 2020 quarter were $1.45, compared with $1.71 in Q3 2019.

However, profits before expenses, taxes, depreciation and amortisation were $3.34bn.

Revenue for its semiconductor solutions declined by 4% year-on-year, with revenue of $4.2bn.

“We delivered third-quarter revenue results in-line with our expectations, driven by healthy demand from cloud and telecom customers, which more than offset the expected reset in wireless,” said Hock Tan, president and CEO of Broadcom Inc, in a statement.

Logan Purk, senior analyst at financial services firm Edward Jones, said: “Overall this was a fairly solid quarter for Broadcom, with results beating consensus expectations on the top and bottom line. This quarter also demonstrates the benefits of diversification between the enterprise software and semiconductor businesses as well.

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By GlobalData

“While the overall semi business was down, management was optimistic with their outlook, guiding to next quarter being a return to year-on-year growth.”

Broadcom Q3 results: Paying down debts

Broadcom’s Q3 results were driven by pandemic-induced work from home measures, which has seen demand for data centre technologies grow.

In an earnings call, Tan told analysts that its infrastructure software revenue was up 41% year-on-year at $1.6bn, making it the fastest-growing segment of Broadcom’s business.

The company is one of Apple’s key component suppliers, with iPhone maker contributing to 20% of Broadcom’s net revenue in 2019. In January 2020 Broadcom signed a $15bn deal with Apple to provide wireless components for the iPhone maker’s products over the next three and a half years.

For the fourth quarter, Broadcom has offered revenue guidance of $6.4bn, plus or minus $150m. This is above Wall Street expectations and is likely to be partly fuelled by increasing demand for 5G technologies, which are priced higher than Broadcom’s traditional products.

A month delay to Apple’s next iPhone release, now expected in October, will likely see a boost in 5G component sales in Q4.

“Our outlook for the fourth quarter reflects a strong anticipated ramp in wireless, as well as the continuing surge in demand for networking from cloud and telecom customers, more than offsetting expected softness in enterprise,” said Tan.

Broadcom also generated a record cash flow of over $3bn, which it used to reduce total debt by $1.9bn in the quarter.

“This is important as it creates more balance sheet flexibility, potentially allowing Broadcom to pursue more acquisitions in the near future,” said Purk. “We believe this quarter reinforces our long-term thesis that Broadcom is well-positioned within faster-growing semiconductor markets that is buoyed by the stable enterprise software business, resulting in attractive free cash flow generation.”

Read more: Semiconductor demand slow down could help China in the long term