Broadcom Inc. (NASDAQ:AVGO)

The financial data reveals several significant trends over the analyzed periods.

Net operating profit after taxes (NOPAT)

NOPAT generally increased from 2019 through 2023, rising from 3,003 million USD to a peak of 14,440 million USD in 2023. However, in 2024, a decline to 11,075 million USD was observed, representing a notable decrease from the prior year but still significantly higher than the initial years.

Cost of capital

The cost of capital showed a steady upward trend across the entire period, increasing from 13.24% in 2019 to 15.48% in 2024. This gradual increase indicates rising capital expenses or risks associated with the company's investments.

Invested capital

Invested capital remained relatively stable from 2019 to 2023, fluctuating modestly around the 60,000 to 63,000 million USD range. A sharp increase occurred in 2024, more than doubling to 140,990 million USD, which could suggest significant capital expenditures or acquisitions during this period.

Economic profit

Economic profit started negative in 2019 at -4,945 million USD and continued to decline further to -5,644 million USD in 2020. However, a turnaround began in 2021 with improvement to -2,028 million USD, followed by positive economic profits in 2022 and 2023, reaching 3,830 million USD and 4,766 million USD respectively. In 2024, economic profit sharply dropped to -10,747 million USD, marking a substantial reversal from the positive gains in the preceding two years.

Overall, the data suggests the company experienced strong growth in profitability and economic profit from 2019 through 2023, supported by stable invested capital and a gradually rising cost of capital. The year 2024, however, reflects a significant shift with lower net operating profit, a dramatic increase in invested capital, and a pronounced decline in economic profit, indicating potential challenges in capital efficiency or profitability during that period.

The financial data reveals significant variability in the company's profitability over the analyzed periods.

Net Income

There is a general upward trend in net income from 2019 through 2023, increasing from 2,724 million US dollars to a peak of 14,082 million US dollars in 2023. However, in the most recent period ending November 3, 2024, net income has sharply declined to 5,895 million US dollars. This pattern suggests that while the company experienced strong growth in profitability over the four years, the latest year indicates a substantial reduction in net earnings.

Net Operating Profit After Taxes (NOPAT)

NOPAT follows a similar trajectory, rising steadily from 3,003 million US dollars in 2019 to a high of 14,440 million US dollars in 2023. The data for 2024 shows a decrease to 11,075 million US dollars. Although this represents a fall compared to the prior year, the operating profit after taxes remains at an elevated level relative to the initial years, indicating that the company maintains strong core profitability despite the recent decline.

Overall, the company demonstrated impressive growth in both net income and operating profit from 2019 through 2023, reaching substantial earnings highs in the 2023 period. The subsequent decrease in 2024, particularly notable in net income, may warrant further investigation to understand underlying causes such as market conditions, operational challenges, or one-time events affecting profitability. Regardless, the sustained high NOPAT level in 2024 compared to earlier years indicates ongoing operational strength.

Provision for (benefit from) income taxes

The provision for income taxes shows a significant upward trend over the reported periods. Initially, there were negative values indicating a tax benefit, with -$510 million in 2019 and -$518 million in 2020. Starting from 2021, the provision shifted to positive values, recording $29 million in 2021, followed by a substantial increase to $939 million in 2022. This upward trajectory continued with $1,015 million in 2023 and further surged to $3,748 million in 2024. This pattern suggests a major change in tax expense recognition or profitability leading to higher tax provisions in recent years.

Cash operating taxes

Cash operating taxes exhibit a consistent and pronounced increase throughout the periods reviewed. The amount rose from $534 million in 2019 to $925 million in 2020. This upward movement continued steadily to $1,402 million in 2021 and remained relatively stable at $1,367 million in 2022. More recently, the figure increased to $1,745 million in 2023 and further escalated significantly to $2,534 million in 2024. This trend reflects growing cash outflows for tax payments, possibly associated with higher taxable income or changes in tax regulations.

Total reported debt & leases

The total reported debt and leases showed an increasing trend from 33,447 million USD in 2019 to 41,689 million USD in 2020. It then slightly decreased over the next three years, reaching 39,648 million USD in 2023. However, in 2024, there was a significant jump to 68,916 million USD, nearly doubling compared to the previous year. This sharp increase suggests a substantial rise in borrowing or lease obligations in the most recent period.

Stockholders’ equity

Stockholders' equity fluctuated modestly between 24,941 million USD in 2019 and 23,874 million USD in 2020, followed by a recovery to 24,962 million USD in 2021. Thereafter, it declined again to a low of 22,709 million USD in 2022, before slightly increasing to 23,988 million USD in 2023. A notable increase occurred in 2024, with equity rising sharply to 67,678 million USD. This surge aligns with the pattern of increased invested capital and may indicate equity financing or revaluation effects during the period.

Invested capital

Invested capital displayed a steady increase from 60,032 million USD in 2019 to a peak of 65,921 million USD in 2020, followed by a minor decline to 62,670 million USD in 2023. A dramatic rise in invested capital was observed in 2024, reaching 140,990 million USD, more than doubling the prior year value. This significant growth suggests substantial investment activities or acquisitions, possibly funded by the increased debt and equity seen in the same period.

Overall analysis

The financial data reveals relative stability in debt, equity, and invested capital from 2019 through 2023, with moderate fluctuations. The year 2024, however, marked a considerable shift characterized by sharp increases in all three key metrics: debt, equity, and invested capital. The simultaneous escalation of these figures points to a major capital restructuring, expansion, or acquisition event during this period. Such changes warrant further investigation to understand the underlying drivers and implications for financial risk and company strategy.

The financial data presents a fluctuating trend in key performance indicators over a six-year period.

Economic Profit

Initially, economic profit was negative, recording -4945 million US dollars in 2019 and further declining to -5644 million in 2020. A significant improvement occurred in 2021 and 2022, with economic profit turning positive and reaching a peak of 4766 million US dollars in 2023. However, this was followed by a sharp reversal in 2024, where economic profit dropped drastically to -10747 million US dollars.

Invested Capital

Invested capital exhibited moderate fluctuations from 2019 to 2023, starting at 60032 million US dollars and increasing gradually to 62670 million by 2023. A substantial increase was observed in 2024, with invested capital more than doubling to 140990 million US dollars, indicating significant new investments or capital allocation in that year.

Economic Spread Ratio

The economic spread ratio mirrored the trend in economic profit. It was negative during 2019 through 2021, improving from -8.24% in 2019 to a less severe -3.14% in 2021. In 2022 and 2023, the ratio turned positive, reaching 7.61%, indicating increasingly efficient capital usage and value creation. However, in 2024, the ratio fell back to negative territory at -7.62%, denoting a decline in economic profitability.

Overall, the data reveals a period of economic recovery and enhanced capital efficiency from 2021 through 2023, followed by a significant downturn in 2024. The large increase in invested capital in 2024, paired with the sharp decline in economic profit and economic spread ratio, suggests potential challenges in generating returns on new investments during that period.

The financial data reveals several significant trends over the six-year period under review. There are notable shifts in economic profit, net revenue, and economic profit margin that offer insight into the company's financial performance and profitability dynamics.

Economic Profit

The economic profit values display considerable volatility. Initially, economic profit was negative, starting at -4945 million US dollars and deteriorating further to -5644 million in the following year. In 2021, the loss narrowed significantly to -2028 million, followed by a notable turnaround with positive economic profits of 3830 million and 4766 million in 2022 and 2023, respectively. However, the latest year shows a dramatic reversal, with economic profit sharply declining to -10747 million, indicating a substantial financial setback.

Net Revenue

Net revenue shows a consistent and strong upward trend throughout the period. It grew steadily from 22597 million US dollars in 2019 to 35819 million in 2023. The most striking change occurs between 2023 and 2024, with net revenue surging to 51574 million, representing a substantial increase in top-line growth. This rapid revenue expansion indicates growth in sales or market demand, contributing positively to overall company size.

Economic Profit Margin (%)

The economic profit margin mirrors the fluctuation in economic profit. It started at -21.88% in 2019, worsened to -23.63% the next year, and then improved markedly in 2021 to -7.39%. The margin turned positive in 2022 and 2023, reaching 11.53% and 13.31%, respectively. However, the profitability indicator sharply declined again in 2024, falling to -20.84%. This wave-like pattern in margins highlights periods of both improved operational efficiency or profitability and significant recent challenges.

In summary, while the company experienced sustained revenue growth, its profitability as measured by economic profit and margin showed considerable instability. The positive trends in economic profit and margin during 2022 and 2023 were not maintained, culminating in a significant financial downturn in 2024. This divergence between increasing revenues and fluctuating profitability warrants further examination to identify underlying causes and potential strategic adjustments.