What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-12-14 compared with 2022-12-16 · 84 added, 88 removed, 273 unchanged (39% of the section changed)

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The following section generally discusses our financial condition and results of operations for our fiscal year ended October 29, 2023 (“fiscal year 2023”) compared to our fiscal year ended October 30, 2022 (“fiscal year 2022”).

A discussion regarding our financial condition and results of operations for fiscal year 2021 compared to our fiscal year ended November 1, 2020 (“fiscal year 2020”) can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2021, filed with the Securities and Exchange Commission (the “SEC”) on December 17, 2021.

A discussion regarding our financial condition and results of operations for fiscal year 2022 compared to our fiscal year ended October 31, 2021 (“fiscal year 2021”) can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2022, filed with the Securities and Exchange Commission (the “SEC”) on December 16, 2022.

We are a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions.

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Our infrastructure software solutions enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms.

Our portfolio of industry-leading infrastructure and security software is designed to modernize, optimize, and secure the most complex hybrid environments, enabling scalability, agility, automation, insights, resiliency and security.

Our portfolio of infrastructure and security software is designed to modernize, optimize, and secure the most complex hybrid 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.

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• the timing, rescheduling or cancellation of expected customer orders.

COVID-19 Update

The COVID-19 pandemic and the efforts to control it disrupted, and reduced the efficiency of, normal business activities in much of the world.

The pandemic resulted in authorities around the world implementing numerous unprecedented measures that created supply chain and market disruption, impacting our workforce and operations, and those of our customers, contract manufacturers, suppliers and logistics providers.

While the demand environment for our semiconductor products was consistent with our expectations for fiscal year 2022, with robust and increased profitability driven by the supply imbalance, the macroeconomic environment remains uncertain and it may not be sustainable over the longer term.

We continue to experience various constraints in our supply chain, including with respect to wafers and substrates.

Although supply lead times have stabilized, we continue to have difficulties in obtaining some necessary components and inputs in a timely manner to meet demand.

In response to the pandemic, we have taken extensive measures to protect the health and safety of our employees and contractors at our facilities.

We continue to monitor the implications of the pandemic on our operations and may modify our business practices and policies from time to time.

Our ability to predict the impact of the pandemic on our business remains limited and its effects on our business are unlikely to be fully realized, or reflected in our financial results, until future periods.

Fiscal Year Highlights

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• We repurchased $5,824 million of common stock.

Pending Acquisition of VMware, Inc.

On May 26, 2022, we entered into an Agreement and Plan of Merger (the “VMware Merger Agreement”) to acquire all of the outstanding shares of VMware, Inc.

(“VMware”) in a cash-and-stock transaction (the “VMware Merger”) that values VMware at approximately $61 billion, based on the closing price of Broadcom common stock on May 25, 2022.

We will also assume VMware’s closing date outstanding debt, net of expected cash.

Under the terms of the VMware Merger Agreement, each share of VMware common stock issued and outstanding immediately prior to the effective time of the VMware Merger will be 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, without interest, or 0.2520 shares of Broadcom common stock.

The stockholder election will be subject to proration, 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, will, in each case, be equal to 50% of the aggregate number of shares of VMware common stock issued and outstanding immediately prior to the effective time of the VMware Merger.

We will assume all outstanding VMware restricted stock unit (“RSU”) awards and performance stock unit awards held by continuing employees.

The assumed awards will be 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 will be accelerated and converted into the right to receive cash and shares of Broadcom common stock, in equal parts.

Effective upon the effective time of the VMware Merger, one member of the VMware Board of Directors, to be mutually agreed by us and VMware, will be added to our Board of Directors.

In connection with the execution of the VMware Merger Agreement, we entered into a commitment letter on May 26, 2022, with certain financial institutions that committed to provide, subject to the terms and conditions of the commitment letter, a senior unsecured bridge facility in an aggregate principal amount of $32 billion.

The VMware Merger, which is expected to be completed in our fiscal year ending October 29, 2023 (“fiscal year 2023”), is subject to satisfaction or waiver of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and clearance under the antitrust laws of the European Union and certain other jurisdictions.

On October 3, 2022, we registered approximately 59 million shares of our common stock.

On November 4, 2022, VMware stockholders adopted the VMware Merger Agreement.

We and VMware each have termination rights under the VMware Merger Agreement and, under specified circumstances, upon termination of the agreement, we and VMware would be required to pay the other a termination fee of $1.5 billion.

Acquisition of VMware, Inc.

On November 22, 2023, we completed the acquisition of VMware in a cash-and-stock transaction (the “VMware Merger”).

Pursuant to the Agreement and Plan of Merger, each share of VMware common stock issued and outstanding immediately prior to the effective time of 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, without interest, 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.

Based on the VMware stockholders’ elections, the VMware stockholders received approximately $30.8 billion in cash and 54.4 million shares of Broadcom common stock in aggregate.

We assumed all outstanding VMware restricted stock unit (“RSU”) awards and performance stock unit awards held by continuing employees.

The assumed awards were converted into approximately 5 million Broadcom RSU awards.

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.

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 preliminary purchase consideration for the VMware Merger was approximately $86.3 billion.

We funded the cash portion of the VMware Merger with net proceeds from the issuance of $30.4 billion in term loans under a credit agreement that we entered into on August 15, 2023 (the “2023 Credit Agreement”), as well as cash on hand.

“Subsequent Events” included in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

The discussions below related to our business and financial results for fiscal year 2023 and prior periods do not include any impact from or information relating to the VMware Merger.

A majority of our net revenue is derived from sales of a broad range of semiconductor devices that are incorporated into electronic products, as well as from modules, switches and subsystems.

Net revenue is also generated from the sale of software solutions that enable our customers to plan, develop, automate, manage, and secure applications across mainframe, distributed, mobile, and cloud platforms.

market demand, including the effects of seasonality, which are discussed in detail in Part I, Item 1.

Our overall net revenue, as well as the percentage of total net revenue generated by sales in our semiconductor solutions and infrastructure software segments, have varied from quarter to quarter, due largely to fluctuations in end-market demand, including the effects of seasonality, which are discussed in detail in Part I, Item 1.

Business under “Seasonality” of this Annual Report on Form 10-K.

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Cost of products sold consists primarily of the costs for semiconductor wafers and other materials, as well as the costs of assembling and testing those products and materials.

Such costs include personnel and overhead related to our manufacturing operations, which include stock-based compensation expense, related occupancy, computer services, equipment costs, manufacturing quality, order fulfillment, warranty adjustments, inventory adjustments including write-downs for inventory obsolescence, and acquisition costs, which include direct transaction costs and acquisition-related costs.

including write-downs for inventory obsolescence, and acquisition costs, which include direct transaction costs and acquisition-related costs.

Although we outsource a significant portion of our manufacturing activities, we do have some proprietary semiconductor fabrication facilities.

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Upon completion of each underlying project, IPR&D assets are reclassified as amortizable purchased intangible assets and amortized over their estimated useful lives.

Restructuring, impairment and disposal charges.

Restructuring, impairment and disposal charges consist primarily of compensation costs associated with employee exit programs, alignment of our global manufacturing operations, rationalizing product development program costs, facility and lease abandonments, fixed asset impairment, IPR&D impairment, and other exit costs, including curtailment of service or supply agreements.

Restructuring and other charges.

Restructuring and other charges consist primarily of non-recurring charges related to IP litigation, compensation costs associated with employee exit programs, alignment of our global manufacturing operations, rationalizing product development program costs, facility and lease abandonments, fixed asset impairment, IPR&D impairment, and other exit costs, including curtailment of service or supply agreements.

Interest expense.

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The corporate income tax rate in Singapore that would otherwise apply to us would be 17%.

We also have a tax holiday on our qualifying income in Malaysia, which is scheduled to expire in 2028.

We also have a tax holiday from our qualifying income earned in Malaysia, which is scheduled to expire in 2028.

Each tax incentive and tax holiday is also subject to our compliance with various operating and other conditions.

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Before taking into consideration the effects of the U.S.

Tax Cuts and Jobs Act and other indirect tax impacts, the effect of these tax incentives and tax holiday was to decrease the provision for income taxes by approximately $1,821 million and $1,156 million for fiscal years 2022 and 2021, respectively.

Our interpretations and conclusions regarding the tax incentives are not binding on any taxing authority, and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded, we could suffer material adverse tax and other financial consequences, which would increase our expenses, reduce our profitability and adversely affect our cash flows.

Tax Cuts and Jobs Act and other indirect tax impacts, the effect of these tax incentives and tax holiday decreased the provision for income taxes by approximately $2,104 million and $1,821 million for fiscal years 2023 and 2022, respectively.

adversely affect our cash flows.

In addition, taxable income in any jurisdiction is dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm’s length basis.

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Critical Accounting Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires us 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 financial statements and the reported amounts of revenue and expenses during the reporting period.

We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.

Our actual financial results may differ materially and adversely from our estimates.

Our critical accounting policies are those that affect our historical financial statements materially and involve difficult, subjective or complex judgments by management.

Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management.

Those policies include revenue recognition, valuation of goodwill and long-lived assets, and income taxes.

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The market approach is based on weighting the financial multiples of comparable companies and applying a control premium.

A reporting unit's carrying value represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash and debt.

We assess the impairment of long-lived assets, including purchased IPR&D, property, plant and equipment, and intangible assets, whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

A reporting unit's

carrying value represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash and debt.

We assess the impairment of long-lived assets, including purchased IPR&D, property, plant and equipment, right-of-use assets, and intangible assets, whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

Factors we consider important which could trigger an impairment review include:

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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 years 2022, 2021 and 2020 consisted of 52 weeks.

Our fiscal years 2023, 2022 and 2021 each consisted of 52 weeks.

The financial statements included in Part II, Item 8.

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Amortization of acquisition-related intangible assets 1,394 1,512 4 5

Restructuring, impairment and disposal charges 57 148 — —

Restructuring and other charges

Total operating expenses 8,483 7,870 24 24

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This is particularly true of our wireless products as fluctuations may be magnified by the timing of launches, and seasonal variations in sales, of mobile devices.

The COVID-19 pandemic and macroeconomic uncertainties may cause our net revenue to fluctuate significantly and impact our results of operations.

In addition, the macroeconomic environment remains uncertain and may cause our net revenue to fluctuate significantly and impact our results of operations.

Although we recognize revenue for the majority of our products when title and control transfer in Penang, Malaysia, we disclose net revenue by country based primarily on the geographic shipment or delivery location specified by our distributors, OEMs, contract manufacturers, channel partners, or software customers.

In each of fiscal years 2022 and 2021, approximately 35% of our net revenue came from shipments or deliveries to China (including Hong Kong).

In fiscal years 2023 and 2022, 32% and 35%, respectively, of our net revenue came from shipments or deliveries to China (including Hong Kong).

However, the end customers for either our products or for the end products into which our products are incorporated, are frequently located in countries other than China (including Hong Kong).

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Total net revenue 100 % 100 %

Net revenue from our semiconductor solutions segment increased due to strong product demand, primarily for networking, server storage and broadband products, as well as higher demand for our wireless content in mobile devices.

Net revenue from our infrastructure software segment increased primarily due to higher demand for our mainframe solutions and FC SAN products.

Net revenue from our semiconductor solutions segment increased due to strong product demand, primarily for networking, server storage and broadband products.

Net revenue from our infrastructure software segment increased primarily due to increases in sales from our mainframe solutions, partially offset by lower demand for our FC SAN products.

Gross margin was $24,690 million, or 69% of net revenue, for fiscal year 2023, compared to $22,095 million, or 67% of net revenue, for fiscal year 2022.

The increase was primarily due to lower amortization of acquisition-related intangible assets, mainly from our 2016 acquisition of Broadcom Corporation and, to a lesser extent, favorable margin within our semiconductor solutions segment.

The increase was primarily due to lower amortization of acquisition-related intangible assets, mainly from our 2016 acquisition of Broadcom Corporation, partially offset by less favorable margin within our semiconductor solutions segment driven by product mix.

We expect to incur additional amortization of acquisition-related intangible assets in future periods as a result of the VMware Merger and any further acquisitions we may make.

Research and Development Expense

Research and development expense increased $334 million, or 7%, in fiscal year 2023, compared to the prior fiscal year.

The increase was primarily due to higher variable employee compensation expense and engineering project costs, partially offset by lower stock-based compensation expense reflecting the full vesting of certain equity awards and the effects of forfeitures.

The increase was primarily due to higher stock-based compensation expense as a result of annual employee equity awards granted at higher grant-date fair values in fiscal year 2023, partially offset by lower variable employee compensation expense.

We expect to incur additional research and development expense in future periods as a result of the VMware Merger and any further acquisitions we may make.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $210 million, or 15%, in fiscal year 2023, compared to the prior fiscal year.

The increase was primarily due to higher variable employee compensation expense, offset in part by lower stock-based compensation expense.

The increase was primarily due to higher costs incurred in connection with the VMware Merger and higher stock-based compensation expense as a result of annual employee equity awards granted at higher grant-date fair values in fiscal year 2023, partially offset by lower variable employee compensation expense.

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets recognized in operating expenses decreased $118 million, or 8%, in fiscal year 2023, compared to the prior fiscal year.

The decrease was primarily due to lower amortization of certain intangible assets from our acquisition of CA, Inc.

Restructuring, Impairment and Disposal Charges

Restructuring, impairment and disposal charges recognized in operating expenses decreased $91 million, or 61%, in fiscal year 2022, compared to the prior fiscal year .

The decrease was primarily due to lower employee termination costs following the completion of key restructuring activities from acquisitions.

The decrease was primarily due to lower amortization of customer-related intangible assets from our acquisition of LSI Corporation.

We expect to incur additional amortization of acquisition-related intangible assets in future periods as a result of the VMware Merger and any further acquisitions we may make.

Restructuring and Other Charges

Restructuring and other charges in fiscal year 2023 primarily included non-recurring charges related to IP litigation.

We expect to incur additional restructuring and other charges in future periods as a result of the VMware Merger and any further acquisitions we may make.

Stock-Based Compensation Expense

Total stock-based compensation expense was $2,171 million and $1,533 million for fiscal years 2023 and 2022, respectively.

The decrease primarily reflects the full vesting of certain equity awards and the effect of forfeitures.

The following table sets forth the total unrecognized compensation cost related to unvested stock-based awards outstanding and expected to vest as of October 30, 2022, which we expect to recognize over the remaining weighted-average service period of 2.7 years.

The increase was primarily due to annual employee equity awards granted at higher grant-date fair values in fiscal year 2023.

We expect to incur additional stock-based compensation expense in future periods as a result of the VMware Merger and any further acquisitions we may make.

The following table sets forth the total unrecognized compensation cost related to unvested stock-based awards outstanding and expected to vest as of October 29, 2023.

The remaining weighted-average service period was 3.4 years.

Unrecognized Compensation Cost, Net of Expected Forfeitures

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During the first quarter of fiscal year ended November 3, 2019 (“fiscal year 2019”), our Compensation Committee approved a broad-based program of multi-year equity grants of time- and market-based RSUs (the “Multi-Year Equity Awards”) in lieu of our annual employee equity awards historically granted on March 15 of each year.

Each Multi-Year Equity Award vests on the same basis as four annual grants made March 15 of each year, beginning in fiscal year 2019, with successive four-year vesting periods.

Each Multi-Year Equity Award vests on the same basis as four annual grants made on March 15 of each year, beginning in fiscal year 2019, with successive four-year vesting periods.

We recognize stock-based compensation expense related to the Multi-Year Equity Awards from the grant date through their respective vesting date, ranging from 4 years to 7 years.

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Total operating income $ 16,207 $ 14,225 $ 1,982 14 %

Operating income from our semiconductor solutions segment increased primarily due to higher net revenue from networking, server storage, broadband, and wireless products, as well as higher gross margin.

Operating income from our infrastructure software segment increased primarily due to higher demand for our mainframe solutions and FC SAN products.

Operating income from our semiconductor solutions segment increased primarily due to higher net revenue from networking, server storage, and broadband products.

Operating income from our infrastructure software segment increased primarily due to higher net revenue from our mainframe solutions, partially offset by lower net revenue from our FC SAN products.

Unallocated expenses include amortization of acquisition-related intangible assets;

stock-based compensation expense;

restructuring, impairment and disposal charges;

restructuring and other charges;

acquisition-related costs;

and other costs that are not used in evaluating the results of, or in allocating resources to, our segments.

Unallocated expenses decreased 18% in fiscal year 2022, compared to the prior fiscal year, primarily due to lower amortization of acquisition-related intangible assets.

Unallocated expenses decreased 2% in fiscal year 2023, compared to the prior fiscal year, primarily due to lower amortization of acquisition-related intangible assets, substantially offset by higher stock-based compensation expense, non-recurring charges related to IP litigation, and acquisition-related costs.

Non-Operating Income and Expenses

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Interest expense was $1,622 million and $1,737 million for fiscal years 2023 and 2022, respectively.

The decrease was primarily due to lower losses on extinguishment of debt.

We expect to incur additional interest expense in future periods as a result of indebtedness associated with the pending VMware Merger.

The decrease was due to losses on extinguishment of debt related to debt transactions incurred in fiscal year 2022.

We expect to incur additional interest expense in future periods as a result of indebtedness associated with the VMware Merger.

Other income (expense), net.

Other income (expense), net includes interest income, gains or losses on investments, foreign currency remeasurement and other miscellaneous items.

Other expense, net, was $54 million for fiscal year 2022, compared to other income, net, of $131 million for fiscal year 2021.

The change was primarily due to changes in investment gains or losses.

Other income, net, was $512 million for fiscal year 2023, compared to other expense, net, of $54 million for fiscal year 2022.

The change was primarily due to higher interest income as a result of higher interest rates and changes in investment gains or losses.

Provision for income taxes.

The provision for income taxes was $1,015 million and $939 million for fiscal years 2023 and 2022, respectively.

The increase was primarily due to higher income from continuing operations before income taxes.

The increase was primarily due to higher income before income taxes, partially offset by an increase in the recognition of uncertain tax benefits as a result of lapses of statutes of limitations.

Liquidity and Capital Resources

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Our primary sources of liquidity as of October 29, 2023 consisted of:

(i) $12,416 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $7.5 billion unsecured revolving credit

facility (the “Revolving Facility”).

In addition, we may also generate cash from the sale of assets and debt or equity financing from time to time.

(i) $14,189 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $7.5 billion unsecured revolving credit facility.

In addition, we may also generate cash from the sale of assets and debt or equity financings from time to time.

Our short-term and long-term liquidity requirements primarily arise from:

(i) business acquisitions and investments we may make from time to time, including the pending VMware Merger, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our $41,218 million of outstanding indebtedness, (vi) share repurchases, and (vii) payment of income taxes.

(i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our $40,815 million of outstanding indebtedness, (vi) share repurchases, and (vii) payment of income taxes.

Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

We expect capital expenditures to be higher in fiscal year 2024 as compared to fiscal year 2023.

Our debt and liquidity needs will increase as a result of the pending VMware Merger, and we intend to fund the cash portion of the consideration with $32 billion in new, fully committed debt financing.

We believe that our cash and cash equivalents on hand, cash flows from operations, and the Revolving Facility, as well as the committed debt funding related to the pending VMware Merger, will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

Our debt and liquidity needs increased as a result of completing the VMware Merger.

We funded the cash portion of the consideration with net proceeds from the issuance of $30,390 million in term loans under the 2023 Credit Agreement, as well as cash on hand.

We also assumed $8,250 million of VMware’s outstanding senior unsecured notes.

We believe that our cash and cash equivalents on hand, cash flows from operations, and the revolving credit facility will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

For additional information regarding our cash requirement from contractual obligations, indebtedness and lease obligations, see Note 13.

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However, we cannot assure you that such additional financing will be available on terms acceptable to us or at all.

Our ability to service our senior unsecured notes and any other indebtedness we may incur will depend on our ability to generate cash in the future.

Our ability to service our senior unsecured notes, the term loans we issued to fund the VMware Merger, and any other indebtedness we may incur will depend on our ability to generate cash in the future.

We may also elect to sell additional debt or equity securities for reasons other than those specified above.

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The increase was attributable to the following:

• Accounts receivable increased to $2,958 million at October 30, 2022 from $2,071 million at October 31, 2021, primarily due to revenue linearity and less receivables sold through factoring arrangements.

• Inventory increased to $1,925 million at October 30, 2022 from $1,297 million at October 31, 2021, primarily to support customer demand and due to higher material costs.

• Cash and cash equivalents increased to $12,416 million at October 30, 2022 from $12,163 million at October 31, 2021, primarily due to $16,736 million in net cash provided by operating activities and $1,935 million in proceeds from long-term borrowings, partially offset by $7,032 million of dividend payments, $7,000 million of common stock repurchases, $2,361 million of debt payments, and $1,455 million of employee withholding tax payments related to net settled equity awards.

• Other current assets increased to $1,205 million at October 30, 2022 from $1,055 million at October 31, 2021, primarily due to an increase in prepaid taxes, offset in part by a decrease in short-term investments.

• Cash and cash equivalents increased to $14,189 million at October 29, 2023 from $12,416 million at October 30, 2022, primarily due to $18,085 million in net cash provided by operating activities, partially offset by $7,645 million of dividend payments, $5,824 million of common stock repurchases, and $1,861 million of employee withholding tax payments related to net settled equity awards.

• Other current liabilities decreased to $3,652 million at October 29, 2023 from $4,412 million at October 30, 2022, primarily due to decreases in contract liabilities and income taxes payable.

• Other current assets increased to $1,606 million at October 29, 2023 from $1,205 million at October 30, 2022, primarily due to an increase in contract assets, offset in part by a decrease in prepaid income taxes.

• Employee compensation and benefits decreased to $935 million at October 29, 2023 from $1,202 million at October 30, 2022, primarily due to lower variable compensation.

• Accounts receivable increased to $3,154 million at October 29, 2023 from $2,958 million at October 30, 2022, primarily due to revenue linearity, offset in part by additional receivables sold through factoring arrangements.

These increases in working capital were offset in part by the following:

• Other current liabilities increased to $4,412 million at October 30, 2022 from $3,839 million at October 31, 2021, primarily due to increases in contract liabilities, taxes payable and interest payable.

• Current portion of long-term debt increased to $1,608 million at October 29, 2023 from $440 million at October 30, 2022, primarily due to certain debt instruments becoming due within the next twelve months, offset in part by repayments.

• Employee compensation and benefits increased to $1,202 million at October 30, 2022 from $1,066 million at October 31, 2021, primarily due to higher variable compensation based on current fiscal year performance.

• Accounts payable increased to $1,210 million at October 29, 2023 from $998 million at October 30, 2022, primarily due to the timing of vendor payments.

Capital Returns

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Dividends to preferred stockholders $ — $ 299

In December 2021, our Board of Directors authorized a stock repurchase program to repurchase up to $10 billion of our common stock from time to time on or prior to December 31, 2022.

During fiscal year 2022, we repurchased and retired approximately 12 million shares of our common stock for $7 billion under this stock repurchase program.

On September 30, 2019, we issued approximately 4 million shares of 8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value per share.

These shares were converted into shares of our common stock during fiscal year 2022.

In December 2021, our Board of Directors authorized a stock repurchase program to repurchase up to $10 billion of our common stock from time to time on or prior to December 31, 2022, which was subsequently extended through December 31, 2023.

In May 2022, our Board of Directors authorized another stock repurchase program to repurchase up to an additional $10 billion of our common stock from time to time through December 31, 2023.

As of October 29, 2023, $7,176 million of the authorized amount remained available for repurchases.

During fiscal years 2023 and 2022, we repurchased and retired approximately 9 million and 12 million shares of our common stock for $5,824 million and $7,000 million, respectively, under these stock repurchase programs.

Repurchases under our stock repurchase programs may be effected through a variety of methods, including open market or privately negotiated purchases.

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Operating Activities

Cash provided by operating activities consisted of net income adjusted for certain non-cash and other items and changes in assets and liabilities.

The $2,972 million increase in cash provided by operations during fiscal year 2022 compared to fiscal year 2021 was due to $4,759 million higher net income and certain non-cash adjustments including deferred taxes and other non-cash taxes, offset by a decrease in amortization of intangible assets and stock-based compensation, as well as a $1,527 million decrease resulting from changes in operating assets and liabilities.

Cash flows from operating activities consisted of net income adjusted for certain non-cash and other items and changes in assets and liabilities.

The $1,349 million increase in cash provided by operations during fiscal year 2023 compared to fiscal year 2022 was due to $2,587 million higher net income, offset in part by $1,249 million lower non-cash adjustments primarily from lower amortization of intangible assets.

Investing Activities

Cash flows from investing activities primarily consisted of cash used for acquisitions, capital expenditures, and sales and purchases of investments.

The $422 million increase in cash used in investing activities for fiscal year 2022 compared to fiscal year 2021 was primarily due to a $238 million increase in cash paid for acquisitions and $169 million lower net proceeds from sales of investments.

Cash flows from investing activities primarily consisted of capital expenditures, sales and purchases of investments, and cash used for acquisitions.

The $22 million increase in cash used in investing activities for fiscal year 2023 compared to fiscal year 2022 was primarily due to a $118 million increase in purchases of investments, net of proceeds from sales of investments, offset by a $193 million decrease in cash paid for acquisitions.

Financing Activities

Cash flows from financing activities primarily consisted of dividend payments, stock repurchases, proceeds and payments related to our long-term borrowings, and employee withholding tax payments related to net settled equity awards.

The $6,842 million increase in cash used in financing activities for fiscal year 2022 compared to fiscal year 2021 was primarily

due to $7,000 million in common stock repurchases, a $820 million increase in dividend payments, and a $156 million increase in employee withholding tax payments related to net settled equity awards, offset in part by a $1,165 million change in net borrowing activities.

Accounting Changes and Recent Accounting Standards

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, in our consolidated financial statements, see Note 2.

“Summary of Significant Accounting Policies” included in Part II, Item 8.

of this Annual Report on Form 10-K.

The $193 million decrease in cash used in financing activities for fiscal year 2023 compared to fiscal year 2022 was primarily due to a $1,958 million decrease in payments on debt obligations and a $1,176 million decrease in stock repurchases, offset by a $1,935 million decrease in proceeds from long-term borrowings, a $613 million increase in dividend payments and a $406 million increase in employee withholding tax payments related to net settled equity awards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis