Broadcom Inc. (NASDAQ:AVGO)

An examination of short-term operating activity ratios reveals fluctuating performance over the observed period. Inventory turnover generally declined from early 2021 through late 2022, before exhibiting a recovery and subsequent volatility through the end of the forecast period. Receivables turnover demonstrated an initial increase, peaking in late 2021, followed by a decline and stabilization, with a notable dip in early 2024. Payables turnover also showed variability, with a general downward trend until mid-2022, followed by increases and then a decline, with a significant spike in mid-2025. Working capital turnover experienced substantial fluctuations, particularly in the later periods, indicating significant shifts in the relationship between working capital and revenue.

Inventory Management

Inventory turnover decreased from 11.01 in January 2021 to a low of 5.77 in October 2022, suggesting a lengthening of the time inventory is held. A subsequent increase to 10.83 in November 2024 indicates improved inventory management, but this was followed by a decline to 7.42 in February 2026. Correspondingly, the average inventory processing period increased from 33 days in January 2021 to 63 days in October 2022, before decreasing to 49 days in February 2026. This suggests a potential issue with inventory obsolescence or overstocking during the period of lower turnover, followed by improvements in efficiency.

Receivables Management

Receivables turnover peaked at 13.25 in October 2021, indicating efficient collection of receivables. However, it decreased to 8.07 in February 2026. The average receivable collection period generally decreased from 37 days in January 2021 to 28 days in October 2021, then increased to 45 days in February 2026, mirroring the trend in receivables turnover. The increase in the collection period suggests a potential slowdown in collecting payments from customers.

Payables Management

Payables turnover fluctuated throughout the period, with a notable increase to 15.27 in July 2022, suggesting faster payment to suppliers. However, it decreased to 10.41 in February 2026. The average payables payment period generally increased from 31 days in January 2021 to 43 days in January 2024, then decreased to 35 days in February 2026. This indicates a shifting strategy in managing payments to suppliers.

Overall Operating Cycle & Cash Conversion Cycle

The operating cycle remained relatively stable in the earlier periods, around 70-73 days, before increasing to 96 days in October 2022 and decreasing to 94 days in February 2026. The cash conversion cycle exhibited more significant fluctuations, increasing from 39 days in January 2021 to 58 days in May 2022, peaking at 69 days in July 2022, and then decreasing to 53 days in February 2026. The substantial increase in working capital turnover in late 2024 and mid-2025, coupled with the changes in the cash conversion cycle, suggests significant changes in the company’s operational efficiency and liquidity management during those periods. The extremely high values in mid-2025 warrant further investigation.

In summary, the observed trends suggest a period of operational challenges in inventory and receivables management through 2022, followed by some improvements. However, the volatility in the later periods, particularly the significant fluctuations in working capital turnover and the cash conversion cycle, indicate potential instability or strategic shifts in the company’s operations. Further investigation is recommended to understand the drivers behind these changes and their impact on overall financial performance.

Inventory turnover exhibited a declining trend from January 31, 2021, through November 2, 2025, followed by a decrease in the most recent period observed. Initially, the ratio decreased steadily, then demonstrated a period of improvement before concluding with a notable decline. This pattern suggests shifts in the company’s inventory management efficiency and potentially, changes in demand or supply chain dynamics.

Initial Decline (Jan 31, 2021 – Nov 2, 2025)

The inventory turnover ratio decreased from 11.01 in January 2021 to 7.42 in November 2025. This indicates that, over this period, the company took longer to sell its inventory. Several factors could contribute to this, including increased inventory levels, slower sales growth, or a combination of both. The most significant declines occurred between January 2021 and October 2021, and again between July 2022 and November 2025.

Cost of Revenue Trend

Cost of revenue generally increased over the observed period, rising from US$2,703 million in January 2021 to US$6,154 million in February 2026. This increase in cost of revenue, coupled with the declining inventory turnover, suggests that the company was managing larger volumes of inventory to support increased sales, but with diminishing efficiency in converting that inventory into revenue.

Inventory Levels

Inventory levels consistently increased throughout the period, moving from US$952 million in January 2021 to US$2,962 million in February 2026. This growth in inventory directly correlates with the observed decrease in inventory turnover, reinforcing the conclusion that the company held inventory for longer periods.

Recent Period (Feb 1, 2026)

The most recent period, ending February 1, 2026, shows a substantial decrease in inventory turnover to 7.42. This represents the lowest value observed throughout the analyzed timeframe. The increase in inventory to US$2,962 million, combined with a cost of revenue of US$6,154 million, contributed to this decline. This warrants further investigation to determine the underlying causes, such as potential obsolescence, overstocking, or a significant slowdown in sales.

In summary, the company experienced a consistent decline in its ability to efficiently convert inventory into sales over the analyzed period. While cost of revenue increased, the inventory turnover ratio decreased, indicating a potential need to re-evaluate inventory management strategies and address the factors contributing to the slower inventory velocity.

The receivables turnover ratio exhibits fluctuations over the observed period, generally indicating changes in the efficiency with which the company converts its receivables into cash. An initial upward trend is followed by periods of relative stability and subsequent decline.

Initial Uptrend (Jan 31, 2021 – Oct 31, 2021)

The receivables turnover ratio increased from 9.78 to 13.25 over this timeframe. This suggests an improving ability to collect receivables, potentially due to more effective credit and collection policies, or increased sales volume. The highest value within the entire observed period occurred at the end of this trend.

Stabilization and Decline (Nov 30, 2021 – Oct 30, 2022)

Following the peak in October 2021, the ratio experienced a decline to 11.22, with some fluctuation. While remaining above the initial value from January 2021, this period indicates a potential slowing in the rate of receivables collection. The ratio remained relatively stable between 10.64 and 11.70 during this period.

Continued Fluctuation and Downward Trend (Jan 29, 2023 – Nov 2, 2025)

The ratio continued to fluctuate, generally trending downwards. It decreased from 11.56 to 8.94. This decline could be attributed to a variety of factors, including extended payment terms offered to customers, a shift in the customer base towards those with longer payment cycles, or a potential increase in uncollectible accounts. The lowest value within the observed period occurred in February 2026.

Recent Period (Feb 1, 2026 – May 4, 2025)

The most recent data shows a slight increase to 9.23 and then 8.94, but remains significantly below the peak observed in late 2021. This suggests that the factors contributing to the earlier decline are still present, and the company has not yet fully restored its receivables collection efficiency. The most recent value of 8.94 is the lowest observed in the period.

Overall, the receivables turnover ratio demonstrates a cyclical pattern with a clear downward trend in the latter portion of the observed period. Further investigation into the underlying causes of these fluctuations would be beneficial to assess the company’s working capital management and potential risks related to accounts receivable.

The accounts payable turnover ratio exhibits fluctuations over the observed period, generally ranging between approximately 8.5 and 15.3. An initial decline is noted from January 2021 through October 2021, followed by a period of increased volatility and a subsequent stabilization before a significant increase in early 2025. A detailed examination of the ratio’s behavior reveals several distinct phases.

Initial Decline (Jan 31, 2021 – Oct 30, 2021)

The payables turnover ratio decreased from 11.67 to 9.77 during this timeframe. This suggests a lengthening of the time it takes the company to pay its suppliers, potentially due to negotiating extended payment terms or a shift in purchasing patterns. The cost of revenue remained relatively stable during this period, while accounts payable increased, contributing to the decline in turnover.

Volatility and Stabilization (Jan 30, 2022 – Oct 29, 2023)

From January 2022 through October 2023, the ratio experienced considerable fluctuation, oscillating between 9.20 and 13.62. While no clear directional trend is apparent, the ratio generally remained within a narrower band than observed in the previous period. Accounts payable and cost of revenue both showed increases during this period, but not consistently enough to establish a clear relationship with the turnover ratio.

Significant Increase and Subsequent Moderation (Feb 4, 2024 – Nov 2, 2025)

A notable increase in the payables turnover ratio occurred beginning in February 2024, peaking at 14.92 in May 2025. This indicates a substantial acceleration in the rate at which the company pays its suppliers. This coincides with a significant increase in both cost of revenue and accounts payable. However, the ratio then decreased to 13.20 by November 2025, suggesting a return towards more typical levels, despite continued increases in both cost of revenue and accounts payable.

Latest Period (Feb 1, 2026)

The most recent observation, as of February 1, 2026, shows a payables turnover ratio of 10.41. This represents a further decrease from the peak observed earlier in the year, and is consistent with the trend observed in the latter part of 2025. The continued increase in cost of revenue and accounts payable suggests that the company is managing its payment cycle differently, potentially prioritizing cash flow or taking advantage of supplier discounts.

Overall, the payables turnover ratio demonstrates a dynamic relationship with both cost of revenue and accounts payable. The observed fluctuations suggest that the company actively manages its payment terms and supplier relationships, responding to changes in operational needs and financial conditions.

The working capital turnover ratio exhibits considerable fluctuation throughout the observed period. Initially, the ratio demonstrates relative stability, followed by a period of significant volatility and then a return to more moderate levels. A general observation is that the ratio tends to be in the range of 2.66 to 3.80 for much of the period, but experiences extreme spikes in certain quarters.

Initial Period (Jan 31, 2021 – Oct 30, 2022)

From January 2021 through October 2022, the working capital turnover ratio generally decreased. It began at 3.25, experienced a slight increase to 3.27, then declined to a low of 2.66 in October 2021. A modest recovery to 3.15 was seen in January 2022, followed by a decrease to 2.90 by October 2022. This suggests a potential slowing in the efficiency of utilizing working capital to generate revenue during this timeframe.

Volatility and Peaks (Jan 29, 2023 – Aug 3, 2025)

A dramatic increase in the ratio is observed starting in January 2023, reaching 5.70. This trend continues with a substantial jump to 8.31 in April 2023, and an extraordinary peak of 64.48 in August 2024. Following this peak, the ratio declines sharply to 17.80 in November 2024, then experiences another extreme spike to 681.61 in February 2025. Subsequently, the ratio falls significantly to 36.01 in May 2025, and further to 7.23 in August 2025. This period indicates highly variable efficiency in working capital utilization, potentially linked to specific operational events or accounting adjustments.

Recent Trend (Nov 2, 2025 – Aug 4, 2024)

From November 2025 through August 2024, the ratio stabilizes at lower levels compared to the peaks observed earlier. The ratio decreases from 7.23 to 4.89, then to 4.49 in February 2026. This suggests a return to a more typical level of working capital turnover, although still lower than the initial period. The significant fluctuations observed earlier appear to have subsided.

Working Capital and Net Revenue Relationship

The fluctuations in the working capital turnover ratio are influenced by both changes in working capital and net revenue. While net revenue generally increased over the period, the more substantial changes in the ratio appear to be driven by larger shifts in working capital levels. The extreme spikes in the ratio coincide with substantial decreases in reported working capital.

In conclusion, the working capital turnover ratio demonstrates a complex pattern of change. While a general downward trend was observed in the earlier part of the period, the latter portion is characterized by significant volatility and then a return to more moderate levels. The extreme fluctuations warrant further investigation to understand the underlying drivers and their impact on operational efficiency.

The average inventory processing period exhibited a generally increasing trend from January 31, 2021, to November 2, 2025, followed by a decrease in the most recent periods analyzed. Initial values indicated efficient inventory management, but a gradual slowdown in processing became apparent over the observed timeframe before a recent reversal.

Initial Trend (Jan 31, 2021 – Nov 2, 2025)

Beginning at 33 days in January 2021, the average inventory processing period steadily increased, reaching a peak of 63 days by October 30, 2022. This suggests a lengthening of the time required to convert inventory into sales. The increase continued, albeit at a slower pace, reaching 62 days in January 2023 and remaining relatively stable through November 2, 2025, at 40 days.

Recent Trend (Feb 1, 2026 – May 4, 2025)

From February 1, 2026, a decreasing trend is observed, with the period falling to 49 days and then stabilizing at 40 days through August 3, 2025. The most recent observation, May 4, 2025, shows a slight increase to 38 days. This recent decline suggests potential improvements in inventory management practices or increased demand.

Magnitude of Change

The largest single-period increase occurred between May 1, 2021, and May 1, 2022, with an increase of 4 days. The most significant decrease occurred between October 29, 2023, and February 4, 2024, with a reduction of 10 days. These periods represent the most substantial shifts in inventory processing efficiency.

Relationship to Inventory Turnover

The observed trends in the average inventory processing period are inversely related to the inventory turnover ratio. As the processing period increased, the inventory turnover ratio decreased, indicating that inventory was being sold more slowly. Conversely, the recent decrease in the processing period coincides with an increase in the inventory turnover ratio, suggesting improved sales velocity.

Overall, the analysis indicates a period of declining inventory efficiency followed by a recent improvement. Continued monitoring of these metrics is recommended to assess the sustainability of the recent positive trend and identify any underlying factors contributing to the observed changes.

The average receivable collection period exhibited fluctuations over the observed timeframe. Initially, a decreasing trend was present, followed by periods of relative stability and subsequent increases.

Initial Decreasing Trend (Jan 31, 2021 – Oct 31, 2021)

From January 31, 2021, to October 31, 2021, the average receivable collection period demonstrated a consistent decline, moving from 37 days to 28 days. This suggests an improvement in the efficiency of collecting receivables during this period. The company was able to convert its accounts receivable into cash more quickly.

Period of Fluctuations (Jan 30, 2022 – Oct 30, 2022)

Following the initial decline, the collection period fluctuated between 33 and 38 days over the subsequent four quarters. While not exhibiting a clear trend, the values remained within a relatively narrow range, indicating a stabilization in collection efficiency. A slight increase to 38 days was observed in May 2022, followed by a return to levels closer to those seen in late 2021.

Increasing Trend (Jan 29, 2023 – Nov 2, 2025)

Beginning in January 2023, the average collection period began to increase, reaching 41 days by November 2025. This represents a notable lengthening in the time required to collect receivables. The period rose from 32 days in January 2023 to 40 days in August 2025, and then to 41 days in November 2025.

Recent Developments (Feb 1, 2026)

The most recent observation, as of February 1, 2026, shows a further increase to 45 days. This continues the upward trend observed in the prior periods and warrants further investigation to determine the underlying causes.

Overall, the trend indicates a shift from efficient receivable collection to a potentially slower process. The lengthening collection period in recent quarters could be indicative of changes in credit policies, customer payment behavior, or increased difficulties in collecting outstanding balances. Continued monitoring of this metric is recommended.

The operating cycle exhibited notable fluctuations over the analyzed period. Initially, the cycle remained relatively stable before experiencing a significant increase, followed by a period of decline and subsequent stabilization with some renewed increases towards the end of the observation window.

Average Inventory Processing Period

The average inventory processing period generally increased from 33 days in January 2021 to a peak of 63 days in October 2022. Following this peak, a consistent downward trend was observed, decreasing to 34 days by November 2024. A slight increase to 36 days was noted in February 2025, followed by further increases to 40 days in August 2025 and 49 days in February 2026. This suggests potential improvements in inventory management efficiency between late 2022 and mid-2024, followed by a possible reversal of that trend.

Average Receivable Collection Period

The average receivable collection period demonstrated more variability. It initially decreased from 37 days in January 2021 to 28 days in October 2021, before increasing to 38 days in May 2022. The period then fluctuated, generally remaining between 30 and 47 days. A notable increase to 47 days was observed in January 2023, remaining at that level through April 2023. Subsequently, the collection period decreased to 31 days by November 2024, before increasing to 41 days in November 2025 and 45 days in February 2026. These fluctuations may indicate changes in credit policies or customer payment behavior.

Operating Cycle

The operating cycle, representing the sum of the inventory processing and receivable collection periods, remained relatively stable at 70 days during the first three quarters of 2021. A substantial increase was then observed, peaking at 96 days in October 2022. The cycle decreased to 92 days in April 2023 and further to 65 days in November 2024, indicating improved efficiency in converting investments in inventory and receivables into cash. However, the operating cycle increased again, reaching 94 days in February 2026. This suggests a potential lengthening of the time required to complete the operating cycle, potentially due to factors affecting either inventory management or receivable collection, or a combination of both.

Overall, the analyzed periods reveal a complex interplay between inventory management and receivable collection. While improvements were evident in the middle of the period, recent trends suggest a potential return to longer operating cycles, warranting further investigation.

The average payables payment period exhibited fluctuations over the observed period, spanning from January 31, 2021, to May 4, 2025. An initial decreasing trend was followed by periods of relative stability and subsequent increases, ultimately concluding with a slight decrease in the most recent periods.

Initial Trend (Jan 31, 2021 – Aug 1, 2021)

The average payables payment period began at 31 days and decreased to 29 days, then increased to 33 days. This suggests a slight initial tightening of payment terms, followed by a return towards the original period.

Period of Stability (Oct 31, 2021 – May 1, 2022)

From October 31, 2021, through May 1, 2022, the average payables payment period remained consistently at 37 days. This indicates a period of stable payment practices and potentially consistent supplier terms.

Fluctuation and Increase (Jul 31, 2022 – Oct 29, 2022)

A significant decrease to 24 days was observed in July 2022, followed by a return to 33 days in October 2022. This volatility could be attributed to specific transactional events or changes in supplier agreements. The period then decreased to 27 days in January 2023.

Peak and Subsequent Decline (Jan 29, 2023 – Nov 3, 2024)

The average payables payment period peaked at 43 days in January 2023, before declining to 32 days by November 2024. This suggests a potential lengthening of payment terms followed by a deliberate effort to reduce outstanding payables or renegotiate terms.

Recent Trend (Feb 2, 2025 – May 4, 2025)

The period increased to 36 days in February 2025, then decreased to 24 days in May 2025. This recent fluctuation suggests ongoing adjustments to payment strategies.

Overall, the average payables payment period demonstrates a dynamic relationship with supplier payments. While periods of stability are present, notable fluctuations indicate responsiveness to internal financial management or external factors influencing supplier relationships. The recent trend suggests a potential focus on reducing the time taken to settle payables.

The short-term operating activity, as measured by the cash conversion cycle and its components, exhibits notable fluctuations over the observed period. An initial period of relative stability is followed by a period of expansion, then contraction, and finally, renewed expansion. The analysis below details these trends for each component and the resulting cash conversion cycle.

Average Inventory Processing Period

The average inventory processing period generally increased from 33 days in January 2021 to a peak of 63 days in October 2022. This suggests a lengthening of the time required to convert raw materials into finished goods and ultimately sell them. Following this peak, a consistent downward trend is observed, decreasing to 34 days in November 2024. A slight increase to 40 days is then seen in August 2025, followed by a further increase to 49 days in February 2026. This suggests improving inventory management efficiency in the latter half of the period, with a recent reversal of that trend.

Average Receivable Collection Period

The average receivable collection period demonstrates more volatility. It initially decreased from 37 days in January 2021 to 28 days in October 2021, indicating faster collection of receivables. This trend reversed, increasing to 41 days in November 2025, before rising again to 45 days in February 2026. A peak of 47 days was observed in both January 2023 and April 2023. The fluctuations suggest potential changes in credit policies or customer payment behavior.

Average Payables Payment Period

The average payables payment period shows a gradual increase from 31 days in January 2021 to 43 days in January 2023. This indicates the company is taking longer to pay its suppliers. Following this peak, the period decreased to 24 days in May 2025, suggesting improved supplier payment practices or a shift in negotiating power. A subsequent increase to 35 days in February 2026 is observed.

Cash Conversion Cycle

The cash conversion cycle initially remained relatively stable around 39-41 days through the first half of 2021. A significant increase is then observed, peaking at 69 days in July 2022. This indicates a longer time between paying for inventory and collecting cash from sales. The cycle then decreased substantially, reaching 33 days in November 2024, reflecting improvements in working capital management. However, the cycle has since expanded again, reaching 59 days in February 2026. This recent increase warrants further investigation to determine the underlying causes and potential impact on liquidity.

Overall, the observed trends suggest a period of working capital inefficiency between 2021 and 2022, followed by improvements through 2024. The recent increases in the inventory processing period, receivable collection period, and cash conversion cycle in late 2024 and early 2026 suggest a potential return to less efficient working capital management.