Broadcom Inc. (NASDAQ:AVGO)

Current Tax Expense

The current tax expense displays a general upward trend over the six-year period. Starting at $277 million in 2019, it more than doubled by 2020 to $564 million. The expense then continued to increase sharply, reaching $1,026 million in 2021, followed by a slight dip to $984 million in 2022. Subsequent years saw the expense rise again, hitting $1,516 million in 2023 and further increasing to $1,783 million in 2024. This pattern indicates a consistent rise in taxable income or changes in tax rates leading to higher current tax liabilities.

Deferred Tax Expense (Benefit)

The deferred tax component shows more volatility and a contrasting pattern compared to the current tax expense. It began with significant benefits recorded as negative values, at -$787 million in 2019 and increasing in magnitude to -$1,082 million in 2020, then slightly decreasing to -$997 million in 2021. This sizable benefit sharply diminished in 2022 to a small benefit of -$45 million, followed by a moderate benefit of -$501 million in 2023. In 2024, however, this trend reversed dramatically, with deferred tax expenses amounting to $1,965 million, indicating a substantial deferred tax liability or reversal of previous benefits. This shift suggests changes in temporary differences or tax positions affecting deferred taxes markedly in the latest year.

Provision for (Benefit from) Income Taxes

The overall provision, which combines current and deferred tax effects, reflects significant fluctuations. Initially, substantial net tax benefits were recorded in 2019 and 2020 at -$510 million and -$518 million respectively, driven largely by the strong deferred tax benefits. The provision then turned slightly positive in 2021 with $29 million, indicating near break-even on total tax expenses. In 2022, the provision rose sharply to $939 million, and continued to increase to $1,015 million in 2023. The most notable change occurred in 2024, with the provision more than tripling to $3,748 million. This sharp increase is primarily driven by the large deferred tax expense recorded in 2024, suggesting significant changes in tax positions or reversals of prior deferred tax benefits impacting the total tax provision.

Statutory Tax Rate

The statutory tax rate remained constant at 21% throughout the entire period, indicating no changes in the baseline corporate tax rate affecting the company's taxation.

State Tax, Net of Federal Benefit

This item showed a declining negative impact from -4.6% in 2019 to -0.1% in 2024, with a slight positive reading of 0.2% in 2022. Overall, state taxes' net impact has diminished over time, suggesting improved tax efficiency or changes in state tax credits.

Foreign Income Taxed at Different Rates

There was a clear upward trend in this negative-effect item, from -52.5% in 2019 to a smaller magnitude of around -22.4% in 2024, indicating a reduction in the unfavorable impact of foreign income being taxed at different rates, possibly due to restructuring or more favorable foreign tax environments.

Deemed Inclusion of Foreign Earnings

This component decreased from 25.9% in 2019 to a low of 8% in 2022 but rebounded to 16.3% by 2024. The fluctuations suggest variable recognition of foreign income inclusions affecting the effective tax rate, with an increasing trend near the end of the period.

Impact of Non-Recurring Intra-Group Transfer of Certain IP Rights

Values are missing for all years except 2024, where a significant positive impact of 39.6% is recorded. This suggests a one-time tax effect related to intellectual property transfers considerably affecting the tax rate in 2024.

Foreign-Derived Intangible Income Deduction

This deduction appeared only in 2020 and 2021 at -1.5% and -3.1%, respectively, indicating its temporary influence before ceasing to affect the tax rate in subsequent years.

Uncertain Tax Benefits

This factor showed variable impact, emerging in 2021 at 3.7%, decreasing to 1.6% in 2022, turning negative at -1.9% in 2023, and returning positive at 1.8% in 2024. The fluctuations indicate changing assessments of tax positions and potential liabilities or reliefs.

Excess Tax Benefits from Stock-Based Compensation

This item consistently contributed to reducing the effective tax rate but increased in absolute negative impact notably in 2024 at -13.1%, compared to a gradual decline from -10.4% in 2019. The rising benefit from stock-based compensation tax adjustments intensified in recent years.

Research and Development Credit

The credit's impact decreased in magnitude from -7.6% in 2019 to about -1.4% in 2022, with a rebound to -6% in 2024. This pattern suggests fluctuating R&D activities or changes in applicable credit policies influencing the effective tax rate.

Other, Net

This component remained relatively small and stable, fluctuating close to zero, implying minor or consistent miscellaneous tax impacts over the years.

Effective Tax Rate on Income (Loss) Before Income Taxes, Before 2017 Tax Reform

The effective tax rate underwent a notable shift from a negative rate of -28% in 2019 to a positive peak of 37.8% in 2024. Intervening years show a transition through near-zero and moderate positive rates. This indicates a substantial increase in the effective tax burden before considering 2017 reform impacts, driven primarily by changing foreign tax dynamics and non-recurring items.

2017 Tax Reform Act

This was reflected only in 2019 with a 5.1% adjustment, after which it no longer affected reported rates, consistent with a one-time impact following the reform.

Effective Tax Rate on Income (Loss) Before Income Taxes

The overall effective tax rate mirrored the trend observed before tax reform impacts, moving from -22.9% in 2019 to a high of 37.8% in 2024. The increasing trend in the later years reflects a combination of decreased foreign income tax benefits, increased inclusion of foreign earnings, and specific one-time tax impacts such as the IP transfer in 2024.

Net Operating Loss, Credit and Other Carryforwards

The balance shows a generally increasing trend, rising steadily from 1,733 million USD in 2019 to 1,809 million USD in 2023, with a significant jump to 2,905 million USD in 2024. This suggests an accumulation of tax loss carryforwards and credits over the years.

Capitalized Research and Development

Data is only available for the two most recent years, showing a substantial increase from 275 million USD in 2023 to 2,459 million USD in 2024. This indicates a recent significant capitalization of R&D expenditures.

Deferred Revenue

Deferred revenue experienced notable fluctuations, increasing sharply from 316 million USD in 2019 to a peak of 1,332 million USD in 2021, then declining to 208 million USD in 2023 before rising again to 776 million USD in 2024. These variations suggest changes in revenue recognition timing or customer contract patterns.

Employee Stock Awards

Values fluctuate moderately, with an initial rise from 218 million USD in 2019 to 273 million USD in 2020, followed by a decrease through 2022, but increasing again to 291 million USD in 2024. The pattern indicates variable stock-based compensation expense or liability over time.

Depreciation and Amortization (Assets)

The values, only available from 2022 onwards, show irregular movements: 156 million USD in 2022, rising to 223 million USD in 2023, then dropping sharply to 81 million USD in 2024. This may reflect changes in asset base or amortization policies.

Other Deferred Income Tax Assets

There was an increase from 313 million USD in 2019 to 449 million USD in 2020, followed by a stabilization around 329 to 446 million USD through 2023, then a marked increase to 672 million USD in 2024. This points to fluctuations in miscellaneous deferred tax assets.

Gross Deferred Income Tax Assets

Gross deferred tax assets rose steadily from 2,580 million USD in 2019 to a peak of 3,744 million USD in 2021, followed by declines to 3,034 million USD in 2023, and a significant increase to 7,184 million USD in 2024. This indicates changes in temporary differences giving rise to deferred tax assets.

Valuation Allowance

The valuation allowance shows an increasing negative balance, moving from -1,563 million USD in 2019 to -1,789 million USD in 2023, and further declining to -2,218 million USD in 2024. This increase in valuation allowance suggests greater uncertainty about the realizability of deferred tax assets.

Deferred Income Tax Assets

Tax assets after valuation allowance improved from 1,017 million USD in 2019 to a high of 1,962 million USD in 2021, decreased afterward to 1,245 million USD in 2023, and then surged significantly to 4,966 million USD in 2024. The sharp increase in 2024 underscores a substantial improvement in recognized deferred tax assets.

Depreciation and Amortization (Liabilities)

The liabilities for depreciation and amortization decreased consistently from -2,360 million USD in 2019 to -97 million USD in 2023, followed by a dramatic increase in magnitude to -8,772 million USD in 2024. This volatile movement indicates significant adjustments in deferred tax liabilities related to depreciation and amortization.

Unamortized Debt Discount and Issuance Costs

Available data starts in 2020, fluctuating around negative balances, with values ranging between -57 million and -420 million USD. The increasing negative balance in 2024 suggests rising unamortized costs associated with debt issuance.

Foreign Earnings Not Indefinitely Reinvested

Negative balances decreased in absolute value from -138 million USD in 2019 to -73 million USD in 2021, then stabilized around -86 million USD before a slight increase to -105 million USD in 2024, indicating relatively stable but negative impact of foreign earnings subject to repatriation considerations.

Other Deferred Income Tax Liabilities

Reported values show increasing liabilities from -36 million USD in 2022 to -210 million USD in 2024, suggesting growing miscellaneous deferred tax obligations.

Deferred Income Tax Liabilities

There is a steady decline in the absolute value of deferred tax liabilities from -2,498 million USD in 2019 to -547 million USD in 2023, followed by a significant increase to -9,507 million USD in 2024. The sharp rise in 2024 indicates a considerable growth in deferred tax liabilities, possibly linked to changes in asset base or tax rate assumptions.

Net Deferred Income Tax Assets (Liabilities)

The net position improved from a negative 1,481 million USD in 2019 to a positive 698 million USD in 2023, reflecting stronger deferred tax assets relative to liabilities. However, in 2024, the net balance swung sharply to a negative 4,541 million USD, indicating a significant net deferred tax liability position that year.

The financial data over the six annual periods reveals distinct trends in liabilities, stockholders’ equity, and net income when considering both reported and adjusted figures.

Total Liabilities

Reported total liabilities show a general increase from US$42,523 million in 2019 to a peak of US$52,032 million in 2020, followed by a slight decline and stabilization around US$48,873 million by 2023, before a substantial surge to US$97,967 million in 2024. Adjusted total liabilities follow a similar pattern, differing slightly in magnitude but confirming the sharp increase in the latest period. This large jump in 2024 indicates significant new obligations or accrued liabilities within that year.

Stockholders’ Equity

Reported stockholders’ equity initially decreased from US$24,941 million in 2019 to a low of US$22,709 million in 2022, then rebounded to US$23,988 million in 2023, before dramatically rising to US$67,678 million in 2024. The adjusted equity values mirror this trend but maintain consistently higher levels than the reported figures. The marked increase in 2024 for equity suggests substantial capital infusion, retained earnings growth, or revaluation effects in that year.

Net Income

Reported net income displayed a strong upward trajectory from US$2,724 million in 2019 to a peak of US$14,495 million in 2022 and 2023, before declining markedly to US$5,895 million in 2024. Adjusted net income shows a broadly similar pattern but with lower absolute values throughout, reflecting the impact of deferred income tax adjustments. The contraction in net income in the final year contrasts with the rise in liabilities and equity, indicating either increased expenses, higher tax provisions, or operational challenges affecting profitability.

Overall, the data suggests a period of growth and expansion up to 2023 in profitability and financial position, followed by a significant rebalancing in 2024 characterized by a sharp rise in liabilities and equity alongside a notable reduction in net income. The adjustments for deferred income taxes consistently lower net income and equity figures compared to reported amounts, underscoring the impact of tax-related accounting treatments on the company’s financial presentation.

Net Profit Margin

The reported net profit margin demonstrates a general upward trend from 12.05% in 2019 to a peak of 39.31% in 2023, followed by a sharp decline to 11.43% in 2024. Similarly, the adjusted net profit margin follows this pattern, increasing from 8.57% in 2019 to 37.92% in 2023, before falling to 15.24% in 2024. The margin improvements from 2019 through 2023 indicate enhanced profitability, while the significant drop in 2024 suggests a reversal potentially driven by extraordinary factors or operational challenges.

Financial Leverage

The reported financial leverage ratio increased from 2.71 in 2019 to a high of 3.23 in 2022, then gradually decreased to 2.45 by 2024. The adjusted leverage figures exhibit a similar pattern, rising from 2.55 in 2019 to 3.31 in 2022 before declining to 2.29 in 2024. These changes suggest an initial increase in reliance on debt financing followed by a deleveraging phase toward the end of the observed period.

Return on Equity (ROE)

Reported ROE shows a substantial increase from 10.92% in 2019, reaching an exceptional 58.7% in 2023, then sharply decreasing to 8.71% in 2024. Adjusted ROE reveals a comparable pattern with growth from 7.33% to 58.31% between 2019 and 2023, followed by a decline to 10.88% in 2024. The marked rise in ROE over the years points to improved effectiveness in generating returns on shareholders’ equity, while the abrupt downturn in 2024 suggests decreased profitability or capital base changes affecting returns.

Return on Assets (ROA)

Reported ROA increases from 4.04% in 2019 to 19.33% in 2023, then declines to 3.56% in 2024. Adjusted ROA follows a similar trend, moving from 2.87% to 18.64% until 2023, then dropping to 4.75% in 2024. This indicates enhanced asset utilization efficiency culminating in 2023, followed by a notable reduction in 2024, which may reflect either lower asset profitability or increased asset base without commensurate income.

Overall Analysis

Over the six-year period, the company exhibits strong improvements across key profitability measures—net profit margin, ROE, and ROA—peaking consistently in 2022-2023. The company’s financial leverage rises initially, indicating greater debt usage, before a decline suggesting efforts to reduce financial risk. The steep declines in all profitability ratios in 2024 merit attention, as they potentially signal significant operational challenges, non-recurring events, or adjustments impacting earnings and asset returns. The difference between reported and adjusted figures remains consistent in direction and magnitude, indicating that adjustments for income tax effects do not materially alter the overall trends.

Reported Net Income

Reported net income shows a significant upward trend from 2019 to 2023, increasing from $2,724 million to a peak of $14,082 million. However, in 2024, there is a sharp decrease to $5,895 million, indicating a notable decline following the period of strong growth.

Adjusted Net Income

Adjusted net income follows a similar pattern, rising substantially from $1,937 million in 2019 to $13,581 million in 2023. In 2024, the adjusted net income decreases to $7,860 million, representing a decline but less pronounced compared to the reported net income drop in the same year.

Reported Net Profit Margin

The reported net profit margin exhibits a steady increase from 12.05% in 2019 to a peak of 39.31% in 2023. This reflects improving profitability over this period. In 2024, this margin sharply declines to 11.43%, indicating a significant reduction in profit relative to revenue.

Adjusted Net Profit Margin

The adjusted net profit margin follows a comparable trend, starting at 8.57% in 2019 and rising to 37.92% in 2023. Similar to the reported margin, it decreases in 2024 to 15.24%, representing a significant drop but maintaining a higher margin than the reported figure for the same year.

Overall Analysis

Both reported and adjusted results demonstrate a consistent and strong growth trajectory in net income and profitability margins from 2019 through 2023. The surge in 2021 suggests an acceleration in earnings and efficiency. The subsequent sharp declines in 2024 for both income and margins highlight a material downturn or adjustment period. The adjusted figures imply a less severe contraction compared to reported results, potentially reflecting the impact of non-recurring items or tax adjustments on the reported metrics. Profit margins have generally been higher on reported bases but showed a more dramatic fall in 2024, while adjusted margins, though also declining, suggest a moderate stabilization.

The financial data over the six reported periods reveals notable trends in both equity and leverage metrics. An overall increase is observed in the stockholders' equity figures, with the reported equity showing fluctuations until the final period where it rises sharply, and the adjusted equity following a similar pattern but with slightly lower values.

Stockholders’ Equity

Reported stockholders’ equity started at approximately 24.9 billion USD in late 2019, experienced a decline by 2020 and 2022 reaching a low around 22.7 billion USD, and then increased significantly to 67.7 billion USD by November 2024. This suggests a substantial change in the company’s equity base during the last period observed.

Adjusted stockholders’ equity mirrors this trend, beginning slightly higher than reported equity at about 26.4 billion USD, decreasing through the middle periods, and then rising to 72.2 billion USD by the final period. The adjustment consistently reflects a higher equity value compared to reported figures, indicating that deferred income tax adjustments have a positive impact on equity valuation.

Financial Leverage Ratios

Reported financial leverage ratios have fluctuated between 2.45 and 3.23 over the periods. Initially at 2.71 in 2019, leverage increased through 2020 and 2022, peaking at around 3.23, before declining to 2.45 by 2024. This pattern indicates an initial increase in the company’s use of debt relative to equity, followed by deleveraging in the final year.

Adjusted financial leverage follows a similar pattern but with slightly lower ratio values. Starting at 2.55, it rises to a peak of 3.31 in 2022, then decreases to 2.29 by 2024. The adjustment leads to a more conservative leverage estimate, consistent with the higher equity values in adjusted data.

In summary, the company experienced a period of increased financial leverage and decreased equity through 2022, indicating potentially higher reliance on debt financing during that timeframe. Significant growth in equity, particularly in the final period, corresponds with a marked reduction in leverage, suggesting improved financial strength and lower risk exposure. The adjustments for deferred income taxes consistently enhance the equity figures and produce slightly lower leverage ratios, implying that these adjustments account for deferred tax liabilities or assets that influence the true financial position more favorably than reported figures alone.

Net Income Trends

Reported net income exhibited a strong upward trajectory from 2019 to 2023, increasing from $2,724 million to a peak of $14,082 million. However, in 2024, a significant decline occurred, with reported net income dropping to $5,895 million. Adjusted net income followed a similar pattern, rising from $1,937 million in 2019 to $13,581 million in 2023, before declining to $7,860 million in 2024. The adjusted figures generally mirror the reported figures but are consistently lower, indicating the impact of deferred income tax adjustments.

Stockholders' Equity Patterns

Reported stockholders’ equity displayed relative stability from 2019 through 2023, fluctuating between approximately $22,709 million and $24,962 million. Notably, in 2024, there was a dramatic increase to $67,678 million. Adjusted stockholders’ equity showed a similar trend, remaining fairly stable from 2019 to 2023 and then jumping sharply to $72,219 million in 2024. The substantial rise in equity in the most recent period suggests significant changes, potentially from capital injections, revaluation, or accounting adjustments related to deferred taxes.

Return on Equity (ROE) Developments

Reported ROE experienced a notable increase from 10.92% in 2019 to an exceptionally high level of 58.7% in 2023, followed by a steep decline to 8.71% in 2024. Adjusted ROE exhibited a similar trend, rising from 7.33% in 2019 to 58.31% in 2023, then falling to 10.88% in 2024. The elevated ROE values between 2021 and 2023 suggest periods of high profitability relative to equity, while the drop in 2024 aligns with the lower net income despite the increase in equity.

General Observations

The data reflects a period of significant profitability growth through 2023, followed by a reversal in 2024 characterized by decreased net income and ROE but a substantial increase in equity. The adjustments for deferred income taxes do not materially affect overall trends but slightly reduce income and equity figures compared to reported amounts. The sharp equity increase in 2024, coupled with lower profitability, results in a marked reduction in ROE, implying a dilution of earnings relative to equity base.

Reported Net Income

The reported net income demonstrates a substantial upward trend from 2019 to 2023, increasing from $2,724 million to a peak of $14,082 million. This represents more than a fivefold increase over the five-year period. However, in 2024, a notable decline occurs, with reported net income dropping sharply to $5,895 million. This indicates potential volatility or significant changes impacting profitability in the most recent year.

Adjusted Net Income

Adjusted net income similarly shows growth from 2019 to 2023, rising from $1,937 million to $13,581 million. The trajectory closely mirrors the reported net income, indicating consistent adjustments applied across the periods. In 2024, unlike the reported net income which fell more dramatically, adjusted net income decreases to $7,860 million, suggesting some stabilization after adjustment despite the downturn.

Reported Return on Assets (ROA)

Reported ROA gradually improves from 4.04% in 2019 to a high of 19.33% in 2023, reflecting efficient asset utilization and enhanced profitability over time. However, there is a significant drop in 2024 to 3.56%, which aligns with the reduction in reported net income. This decrease may indicate asset performance challenges or operational inefficiencies emerging in the latest period.

Adjusted Return on Assets (ROA)

The adjusted ROA values follow a similar pattern, increasing from 2.87% in 2019 to 18.64% in 2023, showing improved returns after accounting for deferred income tax adjustments. Notably, the adjusted ROA in 2024 is higher than the reported ROA at 4.75%, suggesting that adjusted figures present a slightly more favorable view of asset efficiency during the downturn year, although still considerably lower than prior peaks.

General Observations

Over the five-year period leading up to 2023, both reported and adjusted income metrics exhibit robust growth and improving profitability as reflected in ROA metrics. The parallel trends in adjusted and reported figures indicate that tax and accounting adjustments consistently impact fiscal reporting but do not alter the overall growth trajectory. The marked declines in net income and ROA in 2024 highlight a reversal in prior performance gains, which warrants further investigation into underlying causes such as market conditions, operational issues, or extraordinary events.