avgo-20230730

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Broadcom Inc.

(Exact name of registrant as specified in its charter)

Delaware

001-38449

35-2617337

(State or other jurisdiction of
incorporation or organization)

(Commission file Number)

(I.R.S. Employer
Identification No.)

1320 Ridder Park Drive

San Jose,

95131-2313

(408)

433-8000

(Address, including zip code, of principal executive offices and

registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value	AVGO	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of August 25, 2023, there were 412,735,504 shares of our common stock outstanding.

BROADCOM INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended July 30, 2023

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			1
Item 1. Condensed Consolidated Financial Statements — Unaudited			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			30
PART II — OTHER INFORMATION			30
Item 1. Legal Proceedings			30
Item 1A. Risk Factors			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 3. Defaults Upon Senior Securities			51
Item 4. Mine Safety Disclosures			51
Item 5. Other Information			51
Item 6. Exhibits			52
SIGNATURES			53

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PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements — Unaudited

BROADCOM INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED


			Page
Condensed Consolidated Balance Sheets — Unaudited			2
Condensed Consolidated Statements of Operations - Unaudited			3
Condensed Consolidated Statements of Comprehensive Income — Unaudited			4
Condensed Consolidated Statements of Cash Flows — Unaudited			5
Condensed Consolidated Statements of Stockholders’ Equity — Unaudited			6
Notes to Unaudited Condensed Consolidated Financial Statements			8

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BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED


	July 30, 2023		October 30, 2022

	(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	12,055	$	12,416

Trade accounts receivable, net	2,914		2,958
Inventory	1,842		1,925

Other current assets	1,522		1,205
Total current assets	18,333		18,504
Long-term assets:
Property, plant and equipment, net	2,180		2,223
Goodwill	43,619		43,614
Intangible assets, net	4,654		7,111
Other long-term assets	2,809		1,797
Total assets	$	71,595	$	73,249
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	992	$	998
Employee compensation and benefits	831		1,202
Current portion of long-term debt	1,119		440
Other current liabilities	4,403		4,412
Total current liabilities	7,345		7,052
Long-term liabilities:
Long-term debt	38,222		39,075

Other long-term liabilities	3,949		4,413
Total liabilities	49,516		50,540
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 100 shares authorized; none issued and outstanding	—		—
Common stock, $0.001 par value; 2,900 shares authorized; 413 and 418 shares issued and outstanding as of July 30, 2023 and October 30, 2022, respectively	—		—
Additional paid-in capital	20,855		21,159
Retained earnings	1,178		1,604
Accumulated other comprehensive income (loss)	46		(54)
Total stockholders’ equity	22,079		22,709
Total liabilities and equity	$	71,595	$	73,249

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022

	(In millions, except per share data)
Net revenue:
Products	$	6,917	$	6,627	$	20,740	$	19,097
Subscriptions and services	1,959		1,837		5,784		5,176
Total net revenue	8,876		8,464		26,524		24,273
Cost of revenue:
Cost of products sold	2,107		1,921		6,351		5,488
Cost of subscriptions and services	165		156		472		470

Amortization of acquisition-related intangible assets	439		705		1,415		2,142
Restructuring charges	1		1		3		4
Total cost of revenue	2,712		2,783		8,241		8,104
Gross margin	6,164		5,681		18,283		16,169
Research and development	1,358		1,255		3,865		3,722
Selling, general and administrative	388		323		1,174		1,012
Amortization of acquisition-related intangible assets	350		359		1,046		1,154
Restructuring and other charges	212		7		231		42

Total operating expenses	2,308		1,944		6,316		5,930
Operating income	3,856		3,737		11,967		10,239
Interest expense	(406)		(406)		(1,217)		(1,331)

Other income (expense), net	124		6		380		(94)
Income before income taxes	3,574		3,337		11,130		8,814
Provision for income taxes	271		263		572		678


Net income	3,303		3,074		10,558		8,136
Dividends on preferred stock	—		(75)		—		(224)

Net income attributable to common stock	$	3,303	$	2,999	$	10,558	$	7,912

Net income per share attributable to common stock:


Basic	$	8.00	$	7.40	$	25.44	$	19.39




Diluted	$	7.74	$	7.15	$	24.73	$	18.70

Weighted-average shares used in per share calculations:
Basic	413		405		415		408
Diluted	427		430		427		435

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME — UNAUDITED


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022

	(In millions)
Net income	$	3,303	$	3,074	$	10,558	$	8,136
Other comprehensive income, net of tax:
Change in unrealized gain on derivative instruments	228		—		100		—

Change in actuarial loss and prior service costs associated with defined benefit plans	—		1		—		2
Other comprehensive income, net of tax	228		1		100		2
Comprehensive income	$	3,531	$	3,075	$	10,658	$	8,138

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED


	Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022

	(In millions)
Cash flows from operating activities:
Net income	$	10,558	$	8,136
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible and right-of-use assets	2,525		3,368
Depreciation	378		400
Stock-based compensation	1,533		1,146
Deferred taxes and other non-cash taxes	(1,140)		55
Loss on debt extinguishment	—		100


Non-cash interest expense	98		97
Other	(18)		152
Changes in assets and liabilities, net of acquisitions and disposals:
Trade accounts receivable, net	44		(629)
Inventory	83		(540)
Accounts payable	(6)		(383)
Employee compensation and benefits	(382)		8

Other current assets and current liabilities	66		610
Other long-term assets and long-term liabilities	(482)		(367)
Net cash provided by operating activities	13,257		12,153
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired	(17)		(239)

Purchases of property, plant and equipment	(347)		(302)

Purchases of investments	(288)		(200)
Sales of investments	74		200
Other	13		2
Net cash used in investing activities	(565)		(539)
Cash flows from financing activities:
Proceeds from long-term borrowings	—		1,935
Payments on debt obligations	(260)		(2,352)



Payments of dividends	(5,741)		(5,250)
Repurchases of common stock - repurchase program	(5,701)		(7,000)
Shares repurchased for tax withholdings on vesting of equity awards	(1,407)		(1,181)
Issuance of common stock	63		60

Other	(7)		(12)
Net cash used in financing activities	(13,053)		(13,800)
Net change in cash and cash equivalents	(361)		(2,186)
Cash and cash equivalents at beginning of period	12,416		12,163
Cash and cash equivalents at end of period	$	12,055	$	9,977

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — UNAUDITED

Three Fiscal Quarters Ended July 30, 2023


	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
			Shares			Par Value

		(In millions)
Balance as of October 30, 2022			418	$	—		$	21,159	$	1,604	$	(54)	$	22,709
Net income			—	—			—		3,774		—		3,774
Other comprehensive loss			—	—			—		—		(126)		(126)


Dividends to common stockholders			—	—			—		(1,926)		—		(1,926)

Common stock issued			2	—			—		—		—		—
Stock-based compensation			—	—			391		—		—		391
Repurchases of common stock			(2)	—			(107)		(1,081)		—		(1,188)
Shares repurchased for tax withholdings on vesting of equity awards			(1)	—			(324)		—		—		(324)
Balance as of January 29, 2023			417	—			21,119		2,371		(180)		23,310
Net income			—	—			—		3,481		—		3,481
Other comprehensive loss			—	—			—		—		(2)		(2)

Dividends to common stockholders			—	—			—		(1,914)		—		(1,914)

Common stock issued			3	—			63		—		—		63
Stock-based compensation			—	—			513		—		—		513
Repurchases of common stock			(5)	—			(248)		(2,575)		—		(2,823)
Shares repurchased for tax withholdings on vesting of equity awards			(1)	—			(621)		—		—		(621)
Balance as of April 30, 2023			414	—			20,826		1,363		(182)		22,007
Net income			—	—			—		3,303		—		3,303
Other comprehensive income			—	—			—		—		228		228
Dividends to common stockholders			—	—			—		(1,901)		—		(1,901)

Common stock issued			1	—			—		—		—		—
Stock-based compensation			—	—			629		—		—		629
Repurchases of common stock			(2)	—			(127)		(1,587)		—		(1,714)
Shares repurchased for tax withholdings on vesting of equity awards			—	—			(473)		—		—		(473)
Balance as of July 30, 2023			413	$	—		$	20,855	$	1,178	$	46	$	22,079

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — UNAUDITED

Three Fiscal Quarters Ended July 31, 2022


	8.00% Mandatory Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value		Shares	Par Value

	(In millions)
Balance as of October 31, 2021	4	$	—	413	$	—	$	24,330	$	748	$	(116)	$	24,962
Net income	—	—		—	—		—		2,472		—		2,472
Other comprehensive income	—	—		—	—		—		—		1		1


Dividends to common stockholders	—	—		—	—		—		(1,689)		—		(1,689)
Dividends to preferred stockholders	—	—		—	—		—		(74)		—		(74)
Common stock issued	—	—		2	—		1		—		—		1
Stock-based compensation	—	—		—	—		387		—		—		387
Repurchases of common stock	—	—		(4)	—		(1,267)		(1,457)		—		(2,724)
Shares repurchased for tax withholdings on vesting of equity awards	—	—		(1)	—		(368)		—		—		(368)
Balance as of January 30, 2022	4	—		410	—		23,083		—		(115)		22,968
Net income	—	—		—	—		—		2,590		—		2,590
Fair value of partially vested equity awards assumed in connection with an acquisition	—	—		—	—		4		—		—		4


Dividends to common stockholders	—	—		—	—		—		(1,676)		—		(1,676)
Dividends to preferred stockholders	—	—		—	—		—		(75)		—		(75)
Common stock issued	—	—		2	—		59		—		—		59
Stock-based compensation	—	—		—	—		386		—		—		386
Repurchases of common stock	—	—		(5)	—		(1,937)		(839)		—		(2,776)
Shares repurchased for tax withholdings on vesting of equity awards	—	—		(1)	—		(517)		—		—		(517)
Balance as of May 1, 2022	4	—		406	—		21,078		—		(115)		20,963
Net income	—	—		—	—		—		3,074		—		3,074
Other comprehensive income	—	—		—	—		—		—		1		1
Dividends to common stockholders	—	—		—	—		(50)		(1,611)		—		(1,661)
Dividends to preferred stockholders	—	—		—	—		—		(75)		—		(75)
Common stock issued	—	—		2	—		—		—		—		—
Stock-based compensation	—	—		—	—		373		—		—		373
Repurchases of common stock	—	—		(3)	—		(112)		(1,388)		—		(1,500)
Shares repurchased for tax withholdings on vesting of equity awards	—	—		—	—		(299)		—		—		(299)
Balance as of July 31, 2022	4	$	—	405	$	—	$	20,990	$	—	$	(114)	$	20,876

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BROADCOM INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Overview, Basis of Presentation and Significant Accounting Policies

Overview

Broadcom Inc. (“Broadcom”), a Delaware corporation, is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. We develop semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. We have a history of innovation in the semiconductor industry and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Our infrastructure software solutions enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms. Our portfolio of infrastructure and security software is designed to modernize, optimize, and secure the most complex hybrid environments, enabling scalability, agility, automation, insights, resiliency and security. We also offer mission critical fibre channel storage area networking (“FC SAN”) products and related software in the form of modules, switches and subsystems incorporating multiple semiconductor products. Unless stated otherwise or the context otherwise requires, references to “Broadcom,” “we,” “our,” and “us” mean Broadcom and its consolidated subsidiaries. We have two reportable segments: semiconductor solutions and infrastructure software.

Basis of Presentation

We operate on a 52- or 53-week fiscal year ending on the Sunday closest to October 31 in a 52-week year and the first Sunday in November in a 53-week year. Our fiscal year ending October 29, 2023 (“fiscal year 2023”) is a 52-week fiscal year. The first quarter of our fiscal year 2023 ended on January 29, 2023, the second quarter ended on April 30, 2023 and the third quarter ended on July 30, 2023. Our fiscal year ended October 30, 2022 (“fiscal year 2022”) was also a 52-week fiscal year.

The accompanying condensed consolidated financial statements include the accounts of Broadcom and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The October 30, 2022 condensed consolidated balance sheet data were derived from Broadcom’s audited consolidated financial statements included in its Annual Report on Form 10-K for fiscal year 2022 as filed with the Securities and Exchange Commission. All intercompany balances and transactions have been eliminated in consolidation. The operating results for the fiscal quarter ended July 30, 2023 are not necessarily indicative of the results that may be expected for fiscal year 2023, or for any other future period.

Significant Accounting Policies

Use of estimates. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates, and such differences could affect the results of operations reported in future periods.

2. Revenue from Contracts with Customers

We account for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable that we will collect substantially all of the consideration to which we are entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

Disaggregation

We have considered (1) information that is regularly reviewed by our Chief Executive Officer, who has been identified as the chief operating decision maker (the “CODM”) as defined by the authoritative guidance on segment reporting, in evaluating financial performance and (2) disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues. The principal category we use to disaggregate revenues is the nature of our products and subscriptions and services, as presented in our condensed consolidated statements of operations. In addition, revenues by reportable segment are presented in Note 10. “Segment Information.”

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The following tables present revenue disaggregated by type of revenue and by region for the periods presented:


	Fiscal Quarter Ended July 30, 2023
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	656	$	5,773	$	488	$	6,917
Subscriptions and services (a)	1,433		174		352		1,959
Total	$	2,089	$	5,947	$	840	$	8,876


	Fiscal Quarter Ended July 31, 2022
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	645	$	5,500	$	482	$	6,627
Subscriptions and services (a)	1,117		345		375		1,837
Total	$	1,762	$	5,845	$	857	$	8,464


	Three Fiscal Quarters Ended July 30, 2023
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	2,045	$	17,168	$	1,527	$	20,740
Subscriptions and services (a)	4,117		500		1,167		5,784
Total	$	6,162	$	17,668	$	2,694	$	26,524


	Three Fiscal Quarters Ended July 31, 2022
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	1,851	$	15,744	$	1,502	$	19,097
Subscriptions and services (a)	3,380		598		1,198		5,176
Total	$	5,231	$	16,342	$	2,700	$	24,273

_______________

(a) Subscriptions and services predominantly include software licenses with termination for convenience clauses.

Although we recognize revenue for the majority of our products when title and control transfer in Penang, Malaysia, we disclose net revenue by region based primarily on the geographic shipment location or delivery location specified by our distributors, original equipment manufacturer customers, contract manufacturers, channel partners, or software customers.

Contract Balances


		July 30, 2023		October 30, 2022

	(In millions)
Contract Assets		$	652	$	128

Contract Liabilities		$	3,256	$	3,341

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Changes in our contract assets and contract liabilities primarily result from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize contract liabilities when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services. Contract liabilities include amounts billed or collected and advanced payments on contracts or arrangements, which may include termination for convenience provisions. The amount of revenue recognized during the three fiscal quarters ended July 30, 2023 that was included in the contract liabilities balance as of October 30, 2022 was $2,677 million. The amount of revenue recognized during the three fiscal quarters ended July 31, 2022 that was included in the contract liabilities balance as of October 31, 2021 was $2,482 million.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. Remaining performance obligations include unearned revenue and amounts that will be invoiced and recognized as revenue in future periods, but do not include contracts for software, subscriptions or services where the customer is not committed. The customer is not considered committed when termination for convenience without payment of a substantive penalty exists, either contractually or through customary business practice. The majority of our customer software contracts include termination for convenience clauses without a substantive penalty and are not considered committed. Additionally, as a practical expedient, we have not included contracts that have an original duration of one year or less, nor have we included contracts with sales-based or usage-based royalties promised in exchange for a license of intellectual property (“IP”).

Certain multi-year customer contracts, primarily in our semiconductor solutions segment, contain firmly committed amounts and the remaining performance obligations under these contracts as of July 30, 2023 were approximately $21.4 billion. We expect approximately 27% of this amount to be recognized as revenue over the next 12 months. Although the majority of our software contracts are not deemed to be committed, our customers generally do not exercise their termination for convenience rights. In addition, the majority of our contracts for products, subscriptions and services have a duration of one year or less. Accordingly, our remaining performance obligations disclosed above are not indicative of revenue for future periods.

3. Pending Acquisition of VMware, Inc.

On May 26, 2022, we entered into an Agreement and Plan of Merger (the “VMware Merger Agreement”) to acquire all of the outstanding shares of VMware, Inc. (“VMware”) in a cash-and-stock transaction (the “VMware Merger”) that values VMware at approximately $61 billion based on the closing price of Broadcom common stock on May 25, 2022. We will also assume VMware’s closing date outstanding debt.

Under the terms of the VMware Merger Agreement, each share of VMware common stock issued and outstanding immediately prior to the effective time of the VMware Merger will be indirectly converted into the right to receive, at the election of the holder of such share of VMware common stock, either $142.50 in cash, without interest, or 0.2520 shares of Broadcom common stock. The stockholder election will be subject to proration, such that the total number of shares of VMware common stock entitled to receive cash and the total number of shares of VMware common stock entitled to receive Broadcom common stock, will, in each case, be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the VMware Merger.

We will assume all outstanding VMware restricted stock unit (“RSU”) awards and performance stock unit awards held by continuing employees. The assumed awards will be converted into RSU awards for shares of Broadcom common stock. All outstanding in-the-money VMware stock options and RSU awards held by non-employee directors will be accelerated and converted into the right to receive cash and shares of Broadcom common stock, in equal parts.

Effective upon the effective time of the VMware Merger, one member of the VMware Board of Directors, to be mutually agreed by us and VMware, will be added to our Board of Directors.

In connection with the execution of the VMware Merger Agreement, we entered into a commitment letter on May 26, 2022, with certain financial institutions that committed to provide, subject to the terms and conditions of the commitment letter, a senior unsecured bridge facility in an aggregate principal amount of $32 billion. In connection with our entry into the 2023 Credit Agreement as discussed below, we terminated this commitment letter.

The VMware Merger, which is expected to be completed on October 30, 2023, is subject to satisfaction or waiver of customary closing conditions, including clearance under the antitrust laws of certain jurisdictions. On October 3, 2022, we registered approximately 59 million shares of our common stock. On November 4, 2022, VMware stockholders adopted the

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VMware Merger Agreement. We and VMware each have termination rights under the VMware Merger Agreement and, under specified circumstances, upon termination of the agreement, we and VMware would be required to pay the other a termination fee of $1.5 billion.

2023 Term Loans

On August 15, 2023, we entered into a credit agreement (the “2023 Credit Agreement”), which provides us with the ability to borrow up to $28,390 million of term loan commitments (the “2023 Term Facilities”) in connection with the VMware Merger. The 2023 Term Facilities consist of a $10,695 million unsecured term A-2 facility, a $10,695 million unsecured term A-3 facility, and a $7,000 million unsecured term A-5 facility. The funding of the 2023 Term Facilities is dependent on the closing of the VMware Merger, and may be increased by up to $2,000 million.

The 2023 Term Facilities, once funded, will bear interest at floating interest rates and will mature and be payable on the second, third or fifth anniversary of the funding date. Our obligations under the 2023 Credit Agreement are unsecured and are not guaranteed by any of our subsidiaries.

4. Supplemental Financial Information

Cash Equivalents

Cash equivalents included $2,921 million and $3,915 million of time deposits and $2,241 million and $2,365 million of money-market funds as of July 30, 2023 and October 30, 2022, respectively. For time deposits, carrying value approximates fair value due to the short-term nature of the instruments. The fair value of money-market funds, which was consistent with their carrying value, was determined using unadjusted prices in active, accessible markets for identical assets, and as such, they were classified as Level 1 assets in the fair value hierarchy.

Accounts Receivable Factoring

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions pursuant to factoring arrangements. We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the condensed consolidated statements of cash flows. Total trade accounts receivable sold under the factoring arrangements were $900 million and $2,825 million during the fiscal quarter and three fiscal quarters ended July 30, 2023, respectively, and $900 million and $3,000 million during the fiscal quarter and three fiscal quarters ended July 31, 2022, respectively. Factoring fees for the sales of receivables were recorded in other income (expense), net and were not material for any of the periods presented.

Inventory


	July 30, 2023		October 30, 2022

	(In millions)
Finished goods	$	581	$	780
Work-in-process	938		966
Raw materials	323		179
Total inventory	$	1,842	$	1,925

Other Current Assets


	July 30, 2023		October 30, 2022

	(In millions)
Prepaid expenses	$	433	$	864
Other	1,089		341
Total other current assets	$	1,522	$	1,205

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Other Current Liabilities


	July 30, 2023		October 30, 2022

	(In millions)
Contract liabilities	$	2,941	$	2,931
Tax liabilities	515		680
Interest payable	406		393
Other	541		408
Total other current liabilities	$	4,403	$	4,412

Other Long-Term Liabilities


	July 30, 2023		October 30, 2022

	(In millions)
Unrecognized tax benefits	$	2,885	$	3,229
Other	1,064		1,184
Total other long-term liabilities	$	3,949	$	4,413

Supplemental Cash Flow Information


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022

	(In millions)
Cash paid for interest	$	348	$	290	$	1,106	$	989
Cash paid for income taxes	$	427	$	231	$	1,591	$	657

Derivative Instruments

During the fiscal quarter ended January 29, 2023 and fiscal year 2022, we entered into treasury rate lock contracts with original maturities of approximately one year to hedge variability of cash flows due to changes in the benchmark interest rate of anticipated future debt issuances. These treasury rate lock contracts are designated and accounted for as cash flow hedging instruments. As of July 30, 2023 and October 30, 2022, the total notional amounts of these contracts were $5.5 billion and $1.3 billion, respectively. As of July 30, 2023, the fair value of $175 million was recorded in other current assets. As of October 30, 2022, the fair value of $47 million was recorded in other long-term assets. The change in fair value was recorded as a component of other comprehensive income, net of tax, in our condensed consolidated statements of comprehensive income. In August 2023, we early settled all treasury rate lock contracts for a cumulative gain of $371 million.

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5. Intangible Assets


	Gross Carrying Amount		Accumulated Amortization		Net Book Value

	(In millions)
As of July 30, 2023:
Purchased technology	$	19,456	$	(16,828)	$	2,628
Customer contracts and related relationships	7,059		(5,447)		1,612
Order backlog	484		(458)		26
Trade names	699		(421)		278
Other	174		(93)		81
Intangible assets subject to amortization	27,872		(23,247)		4,625
In-process research and development	29		—		29
Total	$	27,901	$	(23,247)	$	4,654

As of October 30, 2022:
Purchased technology	$	19,450	$	(15,422)	$	4,028
Customer contracts and related relationships	7,066		(4,535)		2,531
Order backlog	484		(382)		102
Trade names	700		(372)		328
Other	174		(81)		93
Intangible assets subject to amortization	27,874		(20,792)		7,082
In-process research and development	29		—		29
Total	$	27,903	$	(20,792)	$	7,111

Based on the amount of intangible assets subject to amortization as of July 30, 2023, the expected amortization expense was as follows:


Fiscal Year:	Expected Amortization Expense

	(In millions)
2023 (remainder)	$	789
2024	2,389
2025	682
2026	345
2027	218
Thereafter	202
Total	$	4,625

The weighted-average remaining amortization periods by intangible asset category were as follows:


Amortizable intangible assets:						July 30, 2023

						(In years)
Purchased technology						3
Customer contracts and related relationships						2
Trade names						8
Other						8

The weighted-average remaining amortization period of order backlog was less than one year.

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6. Net Income Per Share

Basic net income per share is computed by dividing net income attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period.

Potentially dilutive shares outstanding include the dilutive effect of unvested RSUs and employee stock purchase plan (“ESPP”) rights, (collectively referred to as “equity awards”), as well as 8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value per share (“Mandatory Convertible Preferred Stock”), which was all converted into shares of our common stock before the end of fiscal year 2022. Potentially dilutive shares whose effect would have been antidilutive are excluded from the computation of diluted net income per share.

The dilutive effect of equity awards is calculated based on the average stock price for each fiscal period, using the treasury stock method. Under the treasury stock method, the amount the employee must pay for purchasing shares under the ESPP and the amount of stock-based compensation expense for future service that we have not yet recognized are collectively assumed to be used to repurchase shares. The dilutive effect of Mandatory Convertible Preferred Stock is calculated using the if-converted method. The if-converted method assumes that these securities were converted at the beginning of the reporting period to the extent that the effect is dilutive.

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented:


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022

	(In millions, except per share data)
Numerator:
Net income	$	3,303	$	3,074	$	10,558	$	8,136
Dividends on preferred stock	—		(75)		—		(224)
Net income attributable to common stock	$	3,303	$	2,999	$	10,558	$	7,912

Denominator:
Weighted-average shares outstanding - basic	413		405		415		408
Dilutive effect of equity awards	14		13		12		15
Dilutive effect of Mandatory Convertible Preferred Stock	—		12		—		12
Weighted-average shares outstanding - diluted	427		430		427		435




Net income per share attributable to common stock:


Basic	$	8.00	$	7.40	$	25.44	$	19.39




Diluted	$	7.74	$	7.15	$	24.73	$	18.70

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7. Borrowings


	Effective Interest Rate		July 30, 2023		October 30, 2022

	(Dollars in millions)
April 2022 Senior Notes - fixed rate
4.000% notes due April 2029	4.17	%	$	750	$	750
4.150% notes due April 2032	4.30	%	1,200		1,200
4.926% notes due May 2037	5.33	%	2,500		2,500
			4,450		4,450
September 2021 Senior Notes - fixed rate
3.137% notes due November 2035	4.23	%	3,250		3,250
3.187% notes due November 2036	4.79	%	2,750		2,750
			6,000		6,000
March 2021 Senior Notes - fixed rate
3.419% notes due April 2033	4.66	%	2,250		2,250
3.469% notes due April 2034	4.63	%	3,250		3,250
			5,500		5,500
January 2021 Senior Notes - fixed rate
1.950% notes due February 2028	2.10	%	750		750
2.450% notes due February 2031	2.56	%	2,750		2,750
2.600% notes due February 2033	2.70	%	1,750		1,750
3.500% notes due February 2041	3.60	%	3,000		3,000
3.750% notes due February 2051	3.84	%	1,750		1,750
			10,000		10,000
June 2020 Senior Notes - fixed rate
3.459% notes due September 2026	4.19	%	752		752
4.110% notes due September 2028	5.02	%	1,118		1,118
			1,870		1,870
May 2020 Senior Notes - fixed rate
2.250% notes due November 2023	2.40	%	105		105
3.150% notes due November 2025	3.29	%	900		900
4.150% notes due November 2030	4.27	%	1,856		1,856
4.300% notes due November 2032	4.39	%	2,000		2,000
			4,861		4,861
April 2020 Senior Notes - fixed rate
5.000% notes due April 2030	5.18	%	606		606

April 2019 Senior Notes - fixed rate
3.625% notes due October 2024	3.98	%	622		622
4.750% notes due April 2029	4.95	%	1,655		1,655
			2,277		2,277
2017 Senior Notes - fixed rate
2.650% notes due January 2023	2.78	%	—		260
3.625% notes due January 2024	3.74	%	829		829
3.125% notes due January 2025	3.23	%	495		495
3.875% notes due January 2027	4.02	%	2,922		2,922

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	Effective Interest Rate		July 30, 2023		October 30, 2022

	(Dollars in millions)
3.500% notes due January 2028	3.60	%	777		777
			5,023		5,283
Assumed CA Senior Notes - fixed rate
4.500% notes due August 2023	4.10	%	143		143
4.700% notes due March 2027	5.15	%	215		215
			358		358
Other senior notes - fixed rate
3.500% notes due August 2024	3.55	%	7		7
4.500% notes due August 2034	4.55	%	6		6
			13		13

Total principal amount outstanding			$	40,958	$	41,218

Current portion of principal amount outstanding			$	1,077	$	403
Short-term finance lease liabilities			42		37
Total current portion of long-term debt			$	1,119	$	440

Non-current portion of principal amount outstanding			$	39,881	$	40,815
Long-term finance lease liabilities			8		22
Unamortized discount and issuance costs			(1,667)		(1,762)
Total long-term debt			$	38,222	$	39,075

2021 Credit Agreement

In January 2021, we entered into a credit agreement (the “2021 Credit Agreement”), which provides for a five-year $7.5 billion unsecured revolving credit facility, of which $500 million is available for the issuance of multi-currency letters of credit. The issuance of letters of credit and certain other instruments would reduce the aggregate amount otherwise available under our revolving credit facility for revolving loans. Subject to the terms of the 2021 Credit Agreement, we are permitted to borrow, repay and reborrow revolving loans at any time prior to the earlier of (a) January 19, 2026 and (b) the date of termination in whole of the revolving lenders’ commitments under the 2021 Credit Agreement. We had no borrowings outstanding under our revolving credit facility at either July 30, 2023 or October 30, 2022.

Commercial Paper

In February 2019, we established a commercial paper program pursuant to which we may issue unsecured commercial paper notes (“Commercial Paper”) in principal amount of up to $2 billion outstanding at any time with maturities of up to 397 days from the date of issue. Commercial Paper is sold under customary terms in the commercial paper market and may be issued at a discount from par or, alternatively, may be sold at par and bear interest at rates dictated by market conditions at the time of their issuance. The discount associated with the Commercial Paper is amortized to interest expense over its term. Outstanding Commercial Paper reduces the amount that would otherwise be available to borrow for general corporate purposes under our revolving credit facility. We had no Commercial Paper outstanding at either July 30, 2023 or October 30, 2022.

Fair Value of Debt

As of July 30, 2023, the estimated aggregate fair value of debt was $35,072 million. The fair value of our senior notes was determined using quoted prices from less active markets. All of our debt obligations are categorized as Level 2 instruments.

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Future Principal Payments of Debt

The future scheduled principal payments of debt as of July 30, 2023 were as follows:


Fiscal Year:	Future Scheduled Principal Payments
	(In millions)
2023 (remainder)	$	143
2024	1,563
2025	495
2026	1,652
2027	3,137
Thereafter	33,968
Total	$	40,958

As of July 30, 2023 and October 30, 2022, we were in compliance with all debt covenants.

8. Stockholders’ Equity

Cash Dividends Declared and Paid


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022

	(In millions, except per share data)
Dividends per share to common stockholders	$	4.60	$	4.10	$	13.80	$	12.30
Dividends to common stockholders	$	1,901	$	1,661	$	5,741	$	5,026
Dividends per share to preferred stockholders	$	—	$	20.00	$	—	$	60.00
Dividends to preferred stockholders	$	—	$	75	$	—	$	224

On September 30, 2019, we issued approximately 4 million shares of Mandatory Convertible Preferred Stock, which were all converted into shares of our common stock before the end of fiscal year 2022.

Stock Repurchase Programs

In December 2021, our Board of Directors authorized a stock repurchase program to repurchase up to $10 billion of our common stock from time to time through December 31, 2022, which was subsequently extended to December 31, 2023. In May 2022, our Board of Directors authorized another stock repurchase program to repurchase up to an additional $10 billion of our common stock from time to time through December 31, 2023.

We repurchased and retired approximately 2 million and 9 million shares of our common stock for $1,707 million and $5,701 million during the fiscal quarter and three fiscal quarters ended July 30, 2023, respectively, and approximately 3 million and 12 million shares of our common stock for $1,500 million and $7,000 million during the fiscal quarter and three fiscal quarters ended July 31, 2022, respectively, under these stock repurchase programs.

Repurchases under our stock repurchase programs may be effected through a variety of methods, including open market or privately negotiated purchases. The timing and amount of shares repurchased will depend on the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors. We are not obligated to repurchase any specific amount of shares of common stock, and the stock repurchase programs may be suspended or terminated at any time.

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Stock-Based Compensation Expense


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022

	(In millions)
Cost of products sold	$	25	$	15	$	63	$	49
Cost of subscriptions and services	36		22		85		60
Research and development	444		259		1,065		788
Selling, general and administrative	124		77		320		249
Total stock-based compensation expense	$	629	$	373	$	1,533	$	1,146

As of July 30, 2023, the total unrecognized compensation cost related to unvested stock-based awards was $6,878 million, which is expected to be recognized over the remaining weighted-average service period of 3.6 years.

Equity Incentive Award Plans

A summary of time- and market-based RSU activity is as follows:


	Number of RSUs Outstanding	Weighted-Average Grant Date Fair Value Per Share

	(In millions, except per share data)
Balance as of October 30, 2022	18	$	238.49
Granted	12	$	516.85
Vested	(6)	$	248.02
Forfeited	(1)	$	286.21
Balance as of July 30, 2023	23	$	381.67

The aggregate fair value of time- and market-based RSUs that vested during the three fiscal quarters ended July 30, 2023 was $4,036 million, which represented the market value of our common stock on the date that the RSUs vested. The number of RSUs vested included shares of common stock that we withheld for settlement of employees’ tax obligations due upon the vesting of RSUs.

9. Income Taxes

The provision for income taxes was $271 million and $572 million for the fiscal quarter and three fiscal quarters ended July 30, 2023, respectively, compared to $263 million and $678 million for the fiscal quarter and three fiscal quarters ended July 31, 2022, respectivel