Broadcom Inc. (NASDAQ:AVGO)

The financial data presents a detailed view of key revenue and expense components as a percentage of net revenue over several quarters. The trends provide insights into revenue composition, cost control, profitability, and expense management.

Revenue Composition

The proportion of net revenue derived from Products has generally shown a declining trend over the periods, starting at around 80% in early 2019 and gradually decreasing to a range between approximately 55% and 60% in the latest quarters. Conversely, Subscriptions and services have increased from roughly 20% to over 40% in the latest periods, indicating a shift in the company's revenue mix toward a greater emphasis on recurring revenue streams.

Cost of Revenue

Total cost of revenue remained relatively steady in the mid-40% range in earlier quarters, with a gradual improvement noted as it declined to the low 30% range during 2022 and 2023, signaling improved gross margin performance. The cost of products sold showed a decreasing trend from around 27%-29% in 2019 to near 18%-19% in recent periods, implying enhanced efficiency or cost reductions. Costs associated with subscriptions and services fluctuated but generally increased significantly in recent quarters, particularly in 2024, reaching close to 8%, reflecting possibly higher investment or operational costs related to subscription offerings.

Gross Margin

The gross margin percentage has improved notably over time, from approximately 55% in early 2019 to a peak exceeding 68% in late 2022 and early 2023. This improvement aligns with the decrease in cost of products sold and overall cost of revenue, indicating better profitability at the gross profit level despite shifts in revenue mix.

Operating Expenses

Operating expenses as a percentage of net revenue showed a consistent downward trend from a high of nearly 46% in early 2019 to below 23% in late 2022. This reduction reflects notable cost control across research and development (R&D), selling, general and administrative (SG&A), amortization, and restructuring charges.

Specifically, R&D expenses decreased from over 22% early in the timeline to around 15%-18% in recent quarters, suggesting reduced investment or improved efficiency. SG&A expenses fell from above 10% to under 7% more recently, reinforcing the trend of tighter cost management. Amortization expense was significantly reduced, from over 16% to under 10%, potentially reflecting the amortization of acquisition-related intangible assets becoming less significant. Restructuring and related charges showed variable but generally low impact, with occasional spikes towards the end of the period.

Operating Income

Operating income margin displayed a marked increase, advancing from a single-digit percentage (approximately 10%) in 2019 to over 45% in various quarters from 2021 through early 2023, demonstrating strong operating leverage and profitability gains. However, there is some volatility in later periods, with a decline to nearly 17% in early 2024, followed by a recovery to over 40% by early 2025.

Interest Expense and Other Income

Interest expense fluctuated between approximately 4% and 8%, with no clear long-term trend. Other income (net) varied, sometimes positive and sometimes negative, but generally remained below 2% of net revenue, suggesting it had a limited effect on overall profitability.

Income before Income Taxes and Net Income

Income from continuing operations before income taxes increased substantially from below 5% in early 2019 to over 40% in late 2022 and early 2023, consistent with operating income trends. Income tax provision showed some variability, with periods reporting tax benefits and others tax expenses ranging between approximately -5% to +3%, indicating fluctuations in tax rates or tax planning impacts across quarters.

Net income mirrored income before taxes, rising from roughly 8% in 2019 to peaks exceeding 37% in 2022 and early 2023. Notably, the net income attributable to common stock followed a similar pattern. There were isolated negative impacts in a few quarters of 2024, where net income declined sharply, partly attributable to income from discontinued operations and possibly other charges.

Summary of Trends and Insights

The data reveals a strategic transition in revenue composition toward subscriptions and services, accompanied by improved cost efficiencies and gross margin expansion. Operating expenses are generally well controlled, enabling substantial growth in operating and net income margins over the period analyzed. The company appears to benefit from scale and cost management despite some quarterly volatility in interest expenses and restructuring charges. The sharp changes in net income in 2024 suggest possible one-time events or restructuring impacts during that year. Overall, the financial profile indicates increasing profitability and a successful shift toward higher-margin recurring revenue streams while maintaining disciplined expense management.