avgo-20240505

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 May 5, 2024


☐			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.)

3421 Hillview Ave

Palo Alto,

94304

(650)

427-6000

(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 May 31, 2024, there were 465,488,374 shares of our common stock outstanding.

BROADCOM INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended May 5, 2024

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			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			36
Item 4. Controls and Procedures			37
PART II — OTHER INFORMATION			37
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 3. Defaults Upon Senior Securities			58
Item 4. Mine Safety Disclosures			58
Item 5. Other Information			58
Item 6. Exhibits			59
SIGNATURES			60

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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


	May 5, 2024		October 29, 2023

	(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	9,809	$	14,189

Trade accounts receivable, net	5,500		3,154
Inventory	1,842		1,898

Other current assets	8,151		1,606
Total current assets	25,302		20,847
Long-term assets:
Property, plant and equipment, net	2,668		2,154
Goodwill	97,873		43,653
Intangible assets, net	45,407		3,867
Other long-term assets	3,961		2,340
Total assets	$	175,211	$	72,861
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,441	$	1,210
Employee compensation and benefits	1,385		935
Current portion of long-term debt	2,426		1,608

Other current liabilities	14,919		3,652
Total current liabilities	20,171		7,405
Long-term liabilities:
Long-term debt	71,590		37,621

Other long-term liabilities	13,489		3,847
Total liabilities	105,250		48,873
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; 465 and 414 shares issued and outstanding as of May 5, 2024 and October 29, 2023, respectively	—		—
Additional paid-in capital	69,754		21,099
Retained earnings	—		2,682
Accumulated other comprehensive income	207		207
Total stockholders’ equity	69,961		23,988
Total liabilities and equity	$	175,211	$	72,861

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				Two Fiscal Quarters Ended
	May 5, 2024		April 30, 2023		May 5, 2024		April 30, 2023

	(In millions, except per share data)
Net revenue:
Products	$	7,192	$	6,741	$	14,604	$	13,823
Subscriptions and services	5,295		1,992		9,844		3,825
Total net revenue	12,487		8,733		24,448		17,648
Cost of revenue:
Cost of products sold	2,429		2,019		4,589		4,244
Cost of subscriptions and services	713		158		1,667		307

Amortization of acquisition-related intangible assets	1,516		441		2,896		976
Restructuring charges	53		—		145		2
Total cost of revenue	4,711		2,618		9,297		5,529
Gross margin	7,776		6,115		15,151		12,119
Research and development	2,415		1,312		4,723		2,507
Selling, general and administrative	1,277		438		2,849		786
Amortization of acquisition-related intangible assets	827		348		1,619		696
Restructuring and other charges	292		9		912		19

Total operating expenses	4,811		2,107		10,103		4,008
Operating income	2,965		4,008		5,048		8,111
Interest expense	(1,047)		(405)		(1,973)		(811)

Other income, net	87		113		272		256
Income from continuing operations before income taxes	2,005		3,716		3,347		7,556
Provision for (benefit from) income taxes	(116)		235		(48)		301
Income from continuing operations	2,121		3,481		3,395		7,255
Income from discontinued operations, net of income taxes	—		—		51		—
Net income	$	2,121	$	3,481	$	3,446	$	7,255




Basic income per share:
Income per share from continuing operations	$	4.56	$	8.39	$	7.41	$	17.40
Income per share from discontinued operations	—		—		0.11		—
Net income per share	$	4.56	$	8.39	$	7.52	$	17.40

Diluted income per share:
Income per share from continuing operations	$	4.42	$	8.15	$	7.18	$	16.95
Income per share from discontinued operations	—		—		0.11		—
Net income per share	$	4.42	$	8.15	$	7.29	$	16.95

Weighted-average shares used in per share calculations:
Basic	465		415		458		417
Diluted	480		427		473		428

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				Two Fiscal Quarters Ended
	May 5, 2024		April 30, 2023		May 5, 2024		April 30, 2023

	(In millions)
Net income	$	2,121	$	3,481	$	3,446	$	7,255
Other comprehensive loss, net of tax:
Change in unrealized loss on derivative instruments	—		(2)		—		(128)


Other comprehensive loss, net of tax	—		(2)		—		(128)
Comprehensive income	$	2,121	$	3,479	$	3,446	$	7,127

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


	Two Fiscal Quarters Ended
	May 5, 2024		April 30, 2023

	(In millions)
Cash flows from operating activities:
Net income	$	3,446	$	7,255

Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible and right-of-use assets	4,587		1,715
Depreciation	288		256
Stock-based compensation	3,039		904
Deferred taxes and other non-cash taxes	(805)		(889)



Non-cash interest expense	221		65
Other	130		(18)
Changes in assets and liabilities, net of acquisitions and disposals:
Trade accounts receivable, net	1,243		(91)
Inventory	68		39
Accounts payable	(167)		(194)
Employee compensation and benefits	(409)		(566)

Other current assets and current liabilities	(2,568)		405
Other long-term assets and long-term liabilities	322		(343)
Net cash provided by operating activities	9,395		8,538
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired	(25,976)		—

Purchases of property, plant and equipment	(254)		(225)

Purchases of investments	(72)		(197)
Sales of investments	131		—
Other	(12)		1
Net cash used in investing activities	(26,183)		(421)
Cash flows from financing activities:
Proceeds from long-term borrowings	30,010		—
Payments on debt obligations	(2,934)		(260)



Payments of dividends	(4,878)		(3,840)
Repurchases of common stock - repurchase program	(7,176)		(3,994)
Shares repurchased for tax withholdings on vesting of equity awards	(2,662)		(947)
Issuance of common stock	64		63

Other	(16)		(2)
Net cash provided by (used in) financing activities	12,408		(8,980)
Net change in cash and cash equivalents	(4,380)		(863)
Cash and cash equivalents at beginning of period	14,189		12,416
Cash and cash equivalents at end of period	$	9,809	$	11,553

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

Two Fiscal Quarters Ended May 5, 2024


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

		(In millions)
Balance as of October 29, 2023			414	$	—		$	21,099	$	2,682	$	207	$	23,988
Net income			—	—			—		1,325		—		1,325


Issuance of common stock upon the acquisition of VMware, Inc.			54	—			53,421		—		—		53,421
Fair value of partially vested equity awards assumed in connection with the acquisition of VMware, Inc.			—	—			749		—		—		749
Dividends to common stockholders			—	—			—		(2,435)		—		(2,435)

Common stock issued			3	—			—		—		—		—
Stock-based compensation			—	—			1,582		—		—		1,582
Repurchases of common stock			(7)	—			(5,655)		(1,572)		—		(7,227)
Shares repurchased for tax withholdings on vesting of equity awards			(1)	—			(1,119)		—		—		(1,119)
Balance as of February 4, 2024			463	—			70,077		—		207		70,284
Net income			—	—			—		2,121		—		2,121


Dividends to common stockholders			—	—			(322)		(2,121)		—		(2,443)

Common stock issued			3	—			64		—		—		64
Stock-based compensation			—	—			1,457		—		—		1,457

Shares repurchased for tax withholdings on vesting of equity awards			(1)	—			(1,548)		—		—		(1,548)
Other			—	—			26		—		—		26
Balance as of May 5, 2024			465	$	—		$	69,754	$	—	$	207	$	69,961

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

Two Fiscal Quarters Ended April 30, 2023


	Common Stock		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive 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

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, deliver, automate, manage and secure applications across mainframe, distributed, edge, mobile, and private and hybrid cloud platforms. Our portfolio of infrastructure and security software is designed to modernize, optimize, and secure the most complex private and hybrid cloud 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.

On November 22, 2023, we completed the acquisition of VMware, Inc. (“VMware”) in a cash-and-stock transaction (the “VMware Merger”). The VMware stockholders received approximately $30,788 million in cash and 54.4 million shares of Broadcom common stock with a fair value of $53,398 million. VMware was a leading provider of multi-cloud services for all applications, enabling digital innovation with enterprise control. We acquired VMware to enhance our infrastructure software capabilities. The results of operations of VMware are included in the unaudited condensed consolidated financial statements commencing on November 22, 2023. See Note 3. “Acquisitions” for additional information.

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 November 3, 2024 (“fiscal year 2024”) is a 53-week fiscal year, with our first fiscal quarter containing 14 weeks. Our fiscal year ended October 29, 2023 (“fiscal year 2023”) was 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 29, 2023 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 2023 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 May 5, 2024 are not necessarily indicative of the results that may be expected for fiscal year 2024, 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.

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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.”

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


	Fiscal Quarter Ended May 5, 2024
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	473	$	6,267	$	452	$	7,192
Subscriptions and services	3,401		487		1,407		5,295
Total	$	3,874	$	6,754	$	1,859	$	12,487


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

	(In millions)
Products	$	780	$	5,458	$	503	$	6,741
Subscriptions and services	1,454		126		412		1,992
Total	$	2,234	$	5,584	$	915	$	8,733


	Two Fiscal Quarters Ended May 5, 2024
	Americas		Asia Pacific		Europe, the Middle East and Africa		Total

	(In millions)
Products	$	1,181	$	12,458	$	965	$	14,604
Subscriptions and services	5,778		993		3,073		9,844
Total	$	6,959	$	13,451	$	4,038	$	24,448


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

	(In millions)
Products	$	1,389	$	11,395	$	1,039	$	13,823
Subscriptions and services	2,684		326		815		3,825
Total	$	4,073	$	11,721	$	1,854	$	17,648

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.

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Contract Balances

Contract assets and contract liabilities balances were as follows:


		May 5, 2024		October 29, 2023

	(In millions)
Contract Assets		$	2,430	$	955

Contract Liabilities		$	16,702	$	2,786

Changes in our contract assets and contract liabilities primarily result from the timing difference between our performance and the customer’s payment. Contract assets and contract liabilities as of May 5, 2024 included the impact of VMware balances acquired on November 22, 2023. 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. As of May 5, 2024, approximately 50% of contract liabilities related to contracts subject to termination for convenience provisions. The amount of revenue recognized during the two fiscal quarters ended May 5, 2024 that was included in the contract liabilities balance as of October 29, 2023 was $1,965 million. The amount of revenue recognized during the two fiscal quarters ended April 30, 2023 that was included in the contract liabilities balance as of October 30, 2022 was $2,287 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. 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 contain firmly committed amounts and the remaining performance obligations under these contracts as of May 5, 2024 were approximately $22.9 billion. We expect approximately 49% of this amount to be recognized as revenue over the next 12 months. For contracts with termination for convenience rights, our customers generally do not exercise those rights. In addition, the majority of our contracts have a duration of one year or less. Accordingly, our remaining performance obligations disclosed above are not indicative of revenue for future periods.

3. Acquisitions

Acquisition of VMware, Inc.

On November 22, 2023, we completed the VMware Merger. Pursuant to the Agreement and Plan of Merger, each share of VMware common stock issued and outstanding immediately prior to the VMware Merger was 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 or 0.2520 shares of Broadcom common stock. The stockholder election was prorated, 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, in each case, was equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the VMware Merger. Based on the VMware stockholders’ elections, the VMware stockholders received approximately $30,788 million in cash and 54.4 million shares of Broadcom common stock with a fair value of $53,398 million.

We funded the cash portion of the VMware Merger with the net proceeds from the issuance of the 2023 Term Loans, as defined and discussed in Note 7. “Borrowings”, as well as cash on hand. We assumed $8,250 million of VMware’s outstanding senior unsecured notes.

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Purchase Consideration


	(In millions)
Fair value of Broadcom common stock issued for outstanding VMware common stock	$	53,398
Cash paid for outstanding VMware common stock	30,788
Cash paid by Broadcom to retire VMware’s term loan	1,257
Fair value of partially vested assumed VMware equity awards	805
Fair value of Broadcom common stock issued for accelerated VMware equity awards	23
Cash paid for accelerated VMware equity awards	13
Effective settlement of pre-existing relationships	6
Total purchase consideration	86,290
Less: cash acquired	6,642
Total purchase consideration, net of cash acquired	$	79,648

We assumed all outstanding VMware restricted stock unit (“RSU”) awards and performance stock unit (“PSU”) awards held by continuing employees. The assumed awards were 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 were accelerated and converted into the right to receive cash and shares of Broadcom common stock, in equal parts.

We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. These fair values were based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, we may further revise our preliminary purchase price allocation during the remainder of the measurement period, which will not exceed 12 months from the date of the VMware Merger. Any such revisions or changes may be material.

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The following table presents our preliminary allocation of the total purchase price, net of cash acquired, updated as of May 5, 2024:


	Estimated Fair Value
	(In millions)
Trade accounts receivable	$	3,571
Inventory	15
Assets held-for-sale	5,206
Other current assets	757
Property, plant and equipment	531
Goodwill	54,206
Intangible assets	45,572
Other long-term assets	1,064
Total assets acquired	110,922
Accounts payable	(359)
Employee compensation and benefits	(848)
Current portion of long-term debt	(1,264)
Liabilities held-for-sale	(1,901)
Other current liabilities	(11,041)
Long-term debt	(6,254)
Other long-term liabilities	(9,607)
Total liabilities assumed	(31,274)
Fair value of net assets acquired	$	79,648

Goodwill is primarily attributable to the assembled workforce and anticipated synergies and economies of scale expected from the integration of the VMware business. The synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the VMware Merger. Goodwill is not deductible for tax purposes.

Assets and liabilities held-for-sale primarily included VMware’s end-user computing (“EUC”) business and certain other assets and liabilities, which were not aligned with our strategic objectives. We do not expect to have significant continuing involvement after disposal and have presented the results in discontinued operations. In February 2024, we signed a definitive agreement to sell EUC for approximately $3.8 billion, before working capital adjustments and estimated selling costs. The sale is expected to close in calendar year 2024, subject to customary closing conditions.

Our results of continuing operations included $2,674 million and $4,776 million of net revenue attributable to VMware for the fiscal quarter and two fiscal quarters ended May 5, 2024, respectively. It is impracticable to determine the effect on net income attributable to VMware as we have integrated a substantial portion of VMware into our ongoing operations. Transaction costs related to the VMware Merger of $20 million and $240 million, respectively, were primarily included in selling, general and administrative expense for the fiscal quarter and two fiscal quarters ended May 5, 2024.

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Intangible Assets


	Fair Value		Weighted-Average Amortization Periods
	(In millions)		(In years)
Developed technology	$	24,156	8
Customer contracts and related relationships	15,239		8
Trade name	1,205		14
Off-market component of customer contracts	242		2
Total identified finite-lived intangible assets	40,842
In-process research and development	4,730		N/A
Total identified intangible assets	$	45,572

Developed technology relates to products used for VMware cloud foundation, application management, security, application networking and security, and software defined edge. We valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of VMware. Customer contracts and related relationships were valued using the with-and-without-method under the income approach. In the with-and-without method, the fair value was measured by the difference between the present values of the cash flows with and without the existing customers in place over the period of time necessary to reacquire the customers. The economic useful life was determined by evaluating many factors, including the useful life of other intangible assets, the length of time remaining on the acquired contracts and the historical customer turnover rates.

Trade name relates to the “VMware” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecast period.

Off-market component of customer contracts relate to rebates and marketing development funds provided to customers prior to the VMware Merger. We valued these contracts based on their remaining unamortized balances, which approximate their fair value. The economic useful life was determined based on the remaining terms of customer contracts.

The fair value of in-process research and development (“IPR&D”) was determined using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the contribution of other assets to those cash flows.

The following table presents the details of IPR&D by category as of the date of the VMware Merger:


Description	IPR&D		Percentage of Completion		Estimated Cost to Complete		Expected Release Date (By Fiscal Year)

	(Dollars in millions)

VMware cloud foundation July 2024 releases	$	790	67	%	$	38	2024
VMware cloud foundation March 2025 releases	$	2,900	58	%	$	185	2025
VMware cloud foundation July 2025 releases	$	750	43	%	$	65	2025
VMware cloud foundation networking and security virtualization	$	265	21	%	$	59	2024
Application networking and security	$	25	21	%	$	47	2024

VMware cloud foundation is a flexible and simplified private cloud platform with public cloud extensibility that integrates leading products including compute, storage, networking, and management into a single solution. It enables customers to modernize infrastructure and accelerate developer productivity, with greater resilience and security.

We believe the amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of the date of the VMware Merger.

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Unaudited Pro Forma Information

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if VMware had been acquired as of the beginning of fiscal year 2023. The unaudited pro forma information includes adjustments to amortization for intangible assets acquired, stock-based compensation expense, interest expense for acquisition financing, amortization of deferred assets and liabilities, and depreciation for property and equipment acquired. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2023 or of the results of our future operations of the combined business.


	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	May 5, 2024		April 30, 2023		May 5, 2024		April 30, 2023

	(In millions)
Pro forma net revenue	$	12,507	$	11,665	$	25,030	$	23,889
Pro forma net income	$	2,261	$	1,796	$	3,876	$	3,849

Acquisition of Seagate’s SoC Operations

On April 23, 2024, we acquired certain assets related to the design, development, and manufacture of System-on-Chip (“SoC”) operations of Seagate Technology Holdings plc for $600 million. We acquired these assets to strengthen our portfolio of SoC products.

The following table presents our preliminary allocation of the total purchase price. Goodwill is allocated to the semiconductor solutions segment and is deductible for tax purposes.


	Estimated Fair Value
	(In millions)
Intangible assets	$	570
Goodwill	14
Other assets	16
Total assets acquired	$	600

Intangible Assets


	Fair Value		Weighted-Average Amortization Periods
	(In millions)		(In years)
Customer contracts and related relationships	$	410	11
Developed technology	90		11
Total identified finite-lived intangible assets	500
In-process research and development	70		N/A
Total identified intangible assets	$	570

Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of SoC controller products for hard disk drive applications. Customer contracts and related relationships were valued using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the customer contracts and related relationships less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the useful lives of other intangible assets and the length of time remaining on the acquired contracts.

Developed technology relates to SoC controller products for hard disk drive applications. We valued the developed technology using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the developed technology. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

The fair value of IPR&D was determined using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue from the IPR&D.

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4. Supplemental Financial Information

Cash Equivalents

Cash equivalents included $1,382 million and $1,470 million of time deposits and $1,438 million and $1,650 million of money-market funds as of May 5, 2024 and October 29, 2023, 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 $1,250 million and $2,500 million during the fiscal quarter and two fiscal quarters ended May 5, 2024, respectively, and $900 million and $1,925 million during the fiscal quarter and two fiscal quarters ended April 30, 2023, respectively.

Inventory


	May 5, 2024		October 29, 2023

	(In millions)
Finished goods	$	569	$	676
Work-in-process	866		901
Raw materials	407		321
Total inventory	$	1,842	$	1,898

Assets and Liabilities Held-for-Sale

In connection with the VMware Merger, we classified VMware’s EUC business and certain other assets and liabilities, which were not aligned with our strategic objectives, as assets and liabilities held-for-sale. The carrying value of these assets and liabilities as of May 5, 2024 represented the fair value determined in the preliminary purchase price allocation of the VMware Merger, adjusted for operating activities since the date of the VMware Merger. As of May 5, 2024, the carrying values of these assets, net of liabilities, approximated the expected selling prices.



	May 5, 2024
	EUC		Other		Total

	(In millions)
Assets held-for-sale:
Goodwill	$	2,268	$	—	$	2,268
Intangible assets, net	2,545		—		2,545

Other assets	57		351		408
Total assets held-for-sale	$	4,870	$	351	$	5,221

Liabilities held-for-sale:	$	1,581	$	176	$	1,757

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Discontinued Operations

We have presented the operating results of these assets and liabilities held-for-sale in discontinued operations as follows:


	Fiscal Quarter Ended May 5, 2024		Two Fiscal Quarters Ended May 5, 2024


	(In millions)
Net revenue	$	329		$	680

Income from discontinued operations before income taxes	$	11		$	69

Provision for income taxes	(11)			(18)
Income from discontinued operations, net of income taxes	$	—		$	51

Other Current Assets


	May 5, 2024		October 29, 2023

	(In millions)
Assets held-for-sale	$	5,221	$	—
Prepaid expenses	1,742		743
Other	1,188		863
Total other current assets	$	8,151	$	1,606

Other Current Liabilities


	May 5, 2024		October 29, 2023

	(In millions)
Contract liabilities	$	10,519	$	2,487
Liabilities held-for-sale	1,757		—
Tax liabilities	1,127		473
Interest payable	450		380
Other	1,066		312
Total other current liabilities	$	14,919	$	3,652

Other Long-Term Liabilities


	May 5, 2024		October 29, 2023

	(In millions)
Unrecognized tax benefits	$	3,209	$	2,792
Contract liabilities	6,183		299
Deferred tax liabilities	2,219		99
Other	1,878		657
Total other long-term liabilities	$	13,489	$	3,847

Supplemental Cash Flow Information


	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	May 5, 2024		April 30, 2023		May 5, 2024		April 30, 2023

	(In millions)
Cash paid for interest	$	946	$	397	$	1,696	$	758
Cash paid for income taxes	$	834	$	891	$	1,738	$	1,164

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5. Goodwill and Intangible Assets

Goodwill


	Semiconductor Solutions		Infrastructure Software		Total

	(In millions)
Balance as of October 29, 2023	$	26,001	$	17,652	$	43,653
Acquisition of VMware	—		54,206		54,206
Acquisition of Seagate’s SoC operations	14		—		14
Balance as of May 5, 2024	$	26,015	$	71,858	$	97,873

Intangible Assets


	Gross Carrying Amount		Accumulated Amortization		Net Book Value

	(In millions)
As of May 5, 2024:
Purchased technology	$	37,193	$	(13,616)	$	23,577
Customer contracts and related relationships	22,950		(7,397)		15,553
Trade names	1,854		(445)		1,409

Other	177		(109)		68
Intangible assets subject to amortization	62,174		(21,567)		40,607
In-process research and development	4,800		—		4,800
Total	$	66,974	$	(21,567)	$	45,407

As of October 29, 2023:
Purchased technology	$	12,938	$	(10,723)	$	2,215
Customer contracts and related relationships	7,059		(5,753)		1,306
Trade names	649		(388)		261

Other	177		(102)		75
Intangible assets subject to amortization	20,823		(16,966)		3,857
In-process research and development	10		—		10
Total	$	20,833	$	(16,966)	$	3,867

Based on the amount of intangible assets subject to amortization as of May 5, 2024, the expected amortization expense was as follows:


Fiscal Year:	Expected Amortization Expense

	(In millions)
2024 (remainder)	$	4,728
2025	7,604
2026	7,035
2027	6,065
2028	5,051
Thereafter	10,124
Total	$	40,607

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


Amortizable intangible assets:						May 5, 2024

						(In years)
Purchased technology						7
Customer contracts and related relationships						7
Trade names						13
Other						7

6. Net Income Per Share

Basic net income per share is computed by dividing net income 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”). 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 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				Two Fiscal Quarters Ended
	May 5, 2024		April 30, 2023		May 5, 2024		April 30, 2023

	(In millions, except per share data)
Numerator:
Income from continuing operations	$	2,121	$	3,481	$	3,395	$	7,255
Income from discontinued operations, net of income taxes	—		—		51		—


Net income	$	2,121	$	3,481	$	3,446	$	7,255

Denominator:
Weighted-average shares outstanding - basic	465		415		458		417
Dilutive effect of equity awards	15		12		15		11
Weighted-average shares outstanding - diluted	480		427		473		428




Basic income per share:
Income per share from continuing operations	$	4.56	$	8.39	$	7.41	$	17.40
Income per share from discontinued operations	—		—		0.11		—
Net income per share	$	4.56	$	8.39	$	7.52	$	17.40

Diluted income per share:
Income per share from continuing operations	$	4.42	$	8.15	$	7.18	$	16.95
Income per share from discontinued operations	—		—		0.11		—
Net income per share	$	4.42	$	8.15	$	7.29	$	16.95

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7. Borrowings


	Effective Interest Rate		May 5, 2024		October 29, 2023

	(Dollars in millions)
2023 Term Loans - floating rate
SOFR plus 1.125% term loan due November 2025	7.10	%	$	9,195	$	—
SOFR plus 1.250% term loan due November 2026	7.01	%	11,195		—
SOFR plus 1.625% term loan due November 2028	7.21	%	8,000		—
			28,390		—
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
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
			4,756		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

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	Effective Interest Rate		May 5, 2024	October 29, 2023

	(Dollars in millions)
2017 Senior Notes - fixed rate
3.625% notes due January 2024	3.74	%	—	829
3.125% notes due January 2025	3.23	%	495	495
3.875% notes due January 2027	4.02	%	2,922	2,922
3.500% notes due January 2028	3.60	%	777	777