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Item 7. Management’s Discussion and Analysis

2024-12-20 compared with 2023-12-14 · 135 added, 117 removed, 240 unchanged (51% of the section changed)

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Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” or in other parts of this Annual Report on Form 10-K.

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 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.

The following section generally discusses our financial condition and results of operations for our fiscal year ended November 3, 2024 (“fiscal year 2024”) compared to our fiscal year ended October 29, 2023 (“fiscal year 2023”).

A discussion regarding our financial condition and results of operations for fiscal year 2023 compared to our fiscal year ended October 30, 2022 can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2023, filed with the Securities and Exchange Commission (the “SEC”) on December 14, 2023.

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

We develop semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products.

We have a history of innovation in the semiconductor industry and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays.

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

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 offer thousands of products that are used in end products such as enterprise and data center networking, including artificial intelligence (“AI”) networking and connectivity, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays.

Our infrastructure software solutions help enterprises simplify their information technology environments so they can increase business velocity and flexibility, and enable customers to plan, develop, deliver, automate, manage and secure applications across mainframe, distributed, edge, mobile, and private and hybrid cloud platforms.

Our portfolio of infrastructure and security software is designed to modernize, optimize, and secure the most complex private and hybrid cloud environments, enabling scalability, agility, automation, insights, resiliency and security making it easy for customers to run their mission-critical workloads.

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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Our semiconductor solutions segment includes all of our product lines and intellectual property (“IP”) licensing.

Our infrastructure software segment includes our mainframe, distributed and cyber security solutions, and our FC SAN business.

Our strategy is to combine best-of-breed technology leadership in semiconductor and infrastructure software solutions, with unmatched scale, on a common sales and administrative platform to deliver a comprehensive suite of infrastructure technology products to the world’s leading business and government customers.

We seek to achieve this through responsibly financed acquisitions of category-leading businesses and technologies, as well as investing extensively in research and development, to ensure our products retain their technology leadership.

Our infrastructure software segment includes our private and hybrid cloud, application development and delivery, software-defined edge, application networking and security, mainframe, distributed and cybersecurity solutions, and our FC SAN business.

Our fiscal year 2024 was a 53-week fiscal year compared to our fiscal year 2023, which was a 52-week fiscal year.

The additional week in the first quarter of fiscal year 2024 resulted in higher net revenue, gross margin dollars, research and development expense, and selling general and administrative expense for fiscal year 2024, compared to the corresponding prior year fiscal period.

Our strategy is focused on technology leadership and category-leading semiconductor and infrastructure software solutions delivering a comprehensive suite of innovative infrastructure technology products to the world’s leading business and government customers.

We seek to achieve this through strategic acquisitions of businesses and technologies, as well as extensive internal research and development, to ensure our products retain their technology market leadership.

This strategy results in a robust business model designed to drive diversified and sustainable operating and financial results.

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• general economic and market conditions in the industries and markets in which we compete;

• anticipated or actual demand for AI-related products;

• our distributors’ product inventory and end customer demand;

• the rate at which our present and future customers and end-users adopt our products and technologies in our target markets, and the rate at which our customers' products that include our technology are accepted in their markets;

• the rate at which our present and future customers and end-users adopt our products and technologies in our target markets, including our AI related products, and the rate at which our customers' products that include our technology are accepted in their markets;

• the shift to cloud-based information technology solutions and services, such as hyperscale computing, which may adversely affect the timing and volume of sales of our products for use in traditional enterprise data centers;

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Highlights during fiscal year 2024 include the following:

• On November 22, 2023, we completed the acquisition of VMware, Inc.

(“VMware”), for approximately $30.8 billion in cash and 544 million shares of Broadcom common stock (on a split adjusted basis) with a fair value of $53.4 billion.

• We generated $19,962 million of cash from operations.

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• We repurchased $7,176 million of common stock.

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.

• We completed a ten-for-one forward stock split of our common stock.

All share, equity award and per share amounts have been retroactively adjusted to reflect the stock split.

Acquisitions and Divestitures

Acquisition of VMware and Divestiture of EUC

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

The VMware stockholders received approximately $30,788 million in cash and 544 million shares of Broadcom common stock with a fair value of $53,398 million.

In addition, 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 RSU awards for shares of Broadcom common stock.

All outstanding RSU awards held by non-employee directors and in-the-money VMware stock options were accelerated and converted into the right to receive cash and shares of Broadcom common stock, in equal parts.

We funded the cash portion of the VMware Merger with the net proceeds from the issuance of the 2023 Term Loans, as defined and discussed in Note 10.

“Borrowings” included in Part II, Item 8 of this Annual Report on Form 10-K, as well as cash on hand.

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

On July 1, 2024, we sold VMware’s end-user computing (“EUC”) business to KKR & Co.

for cash consideration of $3.5 billion , after working capital adjustments.

Acquisition of Seagate’s SoC Operations

On April 23, 2024, we acquired certain assets related to the design, development, and manufacture of System-on-Chip (“SoC”) operations of Seagate Technology Holdings plc for $600 million .

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.

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

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.

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Our software customers generally consist of large enterprises that have computing environments from multiple vendors and are highly complex.

Our private cloud infrastructure suite of solutions are available directly from Broadcom, resellers and distributors, hyperscale cloud providers, value-added OEMs and VMware cloud service provider partners.

VMware Cloud Foundation (“VCF”) provides license portability, which enables customers to purchase subscriptions of VCF software and move their VCF environments between on-premises data centers and supported cloud endpoints.

We remain focused on strengthening relationships and increasing penetration within our existing core, mainframe, VMware, and Symantec endpoint customers and expanding the adoption of our enterprise software offerings with these customers.

We believe our enterprise-wide license model will continue to offer our customers reduced complexity, more flexibility and an easier renewal process that will help drive revenue growth.

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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.

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

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Selling expense consists primarily of compensation and associated costs for sales and marketing personnel, including stock-based compensation expense, sales commissions paid to our independent sales representatives, advertising costs, trade shows, corporate marketing, promotion, travel related to our sales and marketing operations, related occupancy and equipment costs, and other marketing costs.

General and administrative expense consists primarily of compensation and associated costs for executive management, finance, human resources and other administrative personnel, including stock-based compensation expense, outside professional fees, allocated facilities costs, acquisition-related costs and other corporate expenses.

Amortization of acquisition-related intangible assets.

In connection with our acquisitions, we recognize intangible assets that are being amortized over their estimated useful lives.

We also recognize goodwill, which is not amortized, and in-process research and development (“IPR&D”), which is initially capitalized as an indefinite-lived intangible asset, in connection with the acquisitions.

In connection with our acquisitions, we recognize intangible assets that are amortized over their estimated useful lives.

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

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.

Restructuring and other charges consist primarily of non-recurring charges related to compensation costs associated with employee exit programs, IP litigation, alignment of our global manufacturing operations, rationalization of 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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Other income (expense), net.

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

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

Provision for income taxes.

We have structured our operations to maximize the benefit from tax incentives extended to us in various jurisdictions to encourage investment or employment.

We benefit from the tax incentives extended to us in various jurisdictions to encourage investment or employment.

Our tax incentives from the Singapore Economic Development Board provide that any qualifying income earned in Singapore is subject to tax incentives or reduced rates of Singapore income tax, subject to our compliance with the conditions specified in these incentives and legislative developments.

These Singapore tax incentives are presently expected to expire in November 2025.

These Singapore tax incentives are scheduled

to expire in November 2030.

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

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.

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

If we cannot, or elect not to, comply with any such operating conditions specified, we could, in some instances, be required to refund previously realized material tax benefits, or if such tax incentive or tax holiday is terminated prior to its expiration absent a new incentive applying, we will lose the related tax benefits earlier than scheduled.

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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 $2,261 million and $2,104 million for fiscal years 2024 and 2023, 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.

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.

Due to inconsistencies in application of the arm’s length standard among taxing authorities, as well as lack of adequate treaty-based protection, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense.

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, the benefits of the tax incentives may be adversely affected.

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 periods.

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.

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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.

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

of this Annual Report on Form 10-K for further information on our critical accounting policies and estimates.

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

“Summary of Significant Accounting Policies” included in Part II, Item 8 of this Annual Report on Form 10-K for further information on our critical accounting policies and estimates.

Revenue recognition.

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Thus, the reversal of unclaimed rebates may have a positive impact on our net revenue and net income in subsequent periods.

Business combinations.

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Critical estimates in valuing certain acquired intangible assets include, the present value of projected cash flows regarding the projected revenues, projected expenses which include cost of revenue, research and development and selling, general and administrative expenses, technology obsolescence rate, contributory asset charges, discount rate and income tax rate for developed technology;

the projected revenues, customer retention rate, customer ramp up period, discount rate and income tax rate for the customer contracts and related relationships;

the projected revenues, technology obsolescence rate, expected costs to develop IPR&D into commercially viable products, discount rate and income tax rate for the IPR&D;

and the projected revenues, brand asset phase-out pattern, brand asset royalty rate, discount rate and the income tax rate for the trade name.

Unanticipated events and circumstances may occur which could affect the accuracy or validity of such assumptions, estimates or actual results.

Valuation of goodwill and long-lived assets.

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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.

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.

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Fiscal Year Presentation

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 2023, 2022 and 2021 each consisted of 52 weeks.

The financial statements included in Part II, Item 8.

of this Annual Report on Form 10-K are presented in accordance with GAAP and expressed in U.S.

We operate on a 52- or 53-week fiscal year ending on the Sunday closest to October 31.

Our fiscal year 2024 was a 53-week fiscal year.

Fiscal years 2023 and 2022 each consisted of 52 weeks.

The financial statements included in Part II, Item 8 of this Annual Report on Form 10-K are presented in accordance with GAAP and expressed in U.S.

Results of Operations

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2024 October 29,

2022 October 29,

2023 November 3,

2024 October 29,

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Restructuring and other charges

1,533 244 3 1

Total operating expenses 19,046 8,483 37 24

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A relatively small number of customers account for a significant portion of our net revenue.

Sales of products to distributors accounted for 57% and 56% of our net revenue for fiscal years 2023 and 2022, respectively.

Direct sales to WT Microelectronics Co., Ltd., a distributor, accounted for 21% and 20% of our net revenue for fiscal years 2023 and 2022, respectively.

We believe aggregate sales to our top five end customers, through all channels, accounted for approximately 35% of our net revenue for each of fiscal years 2023 and 2022.

We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 20% of our net revenue for each of fiscal years 2023 and 2022.

Direct sales to one customer, which is a distributor, accounted for 28% and 21% of our net revenue for fiscal years 2024 and 2023, respectively.

We believe aggregate sales to our top five end customers, through all channels, accounted for approximately 40% and 35% of our net revenue for fiscal years 2024 and 2023, respectively.

We expect to continue to experience significant customer concentration in future periods.

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From time to time, some of our key semiconductor customers place large orders or delay orders, causing our quarterly net revenue to fluctuate significantly.

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.

This is particularly true of our products used in AI and wireless applications as fluctuations may be magnified by the timing of customer deployments and product launches, and seasonal variations in sales.

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

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Fiscal Year Ended

Net Revenue by Segment October 29,

Net Revenue by Segment November 3,

2024 October 29,

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Fiscal Year Ended

Net Revenue by Segment October 29, 2023 October 30, 2022

Net Revenue by Segment November 3, 2024 October 29, 2023

(As a percentage of net revenue)

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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.

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, 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.

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

Net revenue from our infrastructure software segment increased primarily due to contributions from VMware.

Gross margin was $32,509 million for fiscal year 2024 compared to $24,690 million for fiscal year 2023.

The increase was primarily due to contributions from VMware, partially offset by higher amortization of acquisition-related intangible assets from the VMware Merger.

As a percentage of net revenue, gross margin was 63% and 69% of net revenue for the fiscal years 2024 and 2023, respectively.

The decrease was primarily due to higher amortization of acquisition-related intangible assets from the VMware Merger.

In addition, gross margin contributions from our infrastructure software segment were partially offset by less favorable margin within the semiconductor solutions segment driven by product mix.

Research and Development Expense

Research and development expense increased $4,057 million, or 77%, in fiscal year 2024, compared to the prior fiscal year.

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.

The increase was primarily due to higher compensation, including higher stock-based compensation, as a result of an increase in headcount from the VMware Merger.

The increase in stock-based compensation expense was also due to annual employee equity awards granted at higher grant-date fair values.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $3,367 million, or 211%, in fiscal year 2024, compared to the prior fiscal year.

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.

The increase was primarily due to higher compensation, including higher stock-based compensation, as a result of an increase in headcount from the VMware Merger.

The increase in stock-based compensation expense was also due to annual employee equity awards granted at higher grant-date fair values.

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 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.

Amortization of acquisition-related intangible assets recognized in operating expenses increased $1,850 million, or 133%, in fiscal year 2024, compared to the prior fiscal year primarily due to higher amortization of customer-related intangible assets from the VMware Merger.

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.

Restructuring and other charges recognized in operating expenses were $1,533 million and $244 million in fiscal years 2024 and 2023, respectively.

The fiscal year 2024 charges primarily included employee termination costs from cost reduction activities related to the VMware Merger.

The fiscal year 2023 charges primarily included non-recurring charges related to IP litigation.

Stock-Based Compensation Expense

Total stock-based compensation expense was $5,670 million and $2,171 million for fiscal years 2024 and 2023, respectively.

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 increase was primarily due to equity awards assumed and granted in connection with the VMware Merger and annual employee equity awards granted at higher grant-date fair values.

The following table sets forth the total unrecognized compensation cost related to unvested stock-based awards outstanding and expected to vest as of November 3, 2024.

The remaining weighted-average service period was 3.0 years.

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Fiscal Year Ended

Operating Income by Segment October 29, 2023 October 30, 2022 $ Change % Change

Operating Income by Segment November 3, 2024 October 29, 2023 $ Change % Change

(In millions, except percentages)

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Total operating income $ 13,463 $ 16,207 $ (2,744) (17) %

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.

Operating income from our semiconductor solutions segment increased mainly driven by revenue growth from networking products, primarily AI networking products, partially offset by lower net revenue from our broadband and server storage products.

Operating income from our infrastructure software segment increased primarily due to contributions from VMware.

Unallocated expenses include amortization of acquisition-related intangible assets;

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

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.

Unallocated expenses increased 192% in fiscal year 2024, compared to the prior fiscal year, primarily due to higher amortization of acquisition-related intangible assets, stock-based compensation expense and restructuring and other charges.

These increases were primarily due to the VMware Merger.

The increase in stock-based compensation expense was also due to annual employee equity awards granted at higher grant-date fair values .

Non-Operating Income and Expenses

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Interest expense was $3,953 million and $1,622 million for fiscal years 2024 and 2023, respectively.

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.

The increase was primarily due to interest on debt incurred for 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 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.

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

Other income, net, was $406 million and $512 million for fiscal years 2024 and 2023, respectively.

The decrease was primarily due to lower interest income as a result of a lower invested balance.

Provision for income taxes.

The provision for income taxes was $3,748 million and $1,015 million for fiscal years 2024 and 2023, respectively.

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.

The increase was primarily due to the impact of a non-recurring intra-group transfer of certain IP rights to the United States as a result of supply chain realignment and the resulting shift in the jurisdictional mix of income.

Liquidity and Capital Resources

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We believe our cash equivalents are liquid and accessible.

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

Our primary sources of liquidity as of November 3, 2024 consisted of:

(i) $9,348 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.

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

(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.

(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 $69,847 million of outstanding indebtedness, and (vi) 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 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 expect capital expenditures to be higher in the fiscal year ending November 2, 2025 as compared to fiscal year 2024.

Our debt and liquidity needs increased in fiscal year 2024 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 (the “2023 Term Loans”), 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.

During fiscal year 2024, we made repayments of $16,795 million on our 2023 Term Loans.

We believe that our cash and cash equivalents on hand, cash flows from operations and our 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 14.

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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, 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.

Our ability to service our senior unsecured notes, the 2023 Term Loans 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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Such tenders, exchanges or purchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

We may also make additional prepayments of the 2023 Term Loans.

The amounts involved may be material.

Working Capital

Working capital increased to $13,442 million at October 29, 2023 from $11,452 million at October 30, 2022.

The increase was attributable to the following:

• 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:

• 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.

• 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.

On November 22, 2023, we completed the VMware Merger.

The following table presents the changes in selected balance sheet captions other than assets acquired and liabilities assumed from the VMware Merger during fiscal year 2024.

Balances Acquired and Assumed from VMware (a)

Non-VMware Acquisition

(In millions)

Trade accounts receivable, net

$ 3,154 $ 3,571 $ 4,416 $ (2,309)

Other current assets $ 1,606 $ 1,108 $ 4,071 $ 1,357

Accounts payable $ 1,210 $ 359 $ 1,662 $ 93

Employee compensation and benefits $ 935 $ 848 $ 1,971 $ 188

Current portion of long-term debt $ 1,608 $ 1,264 $ 1,271 $ (1,601)

Other current liabilities $ 3,652 $ 11,217 $ 11,793 $ (3,076)

_____________________________

(a) Excludes VMware’s EUC assets and liabilities held for sale.

• Trade accounts receivable, net decreased primarily due to strong collections and additional receivables sold through factoring arrangements.

• Other current assets increased from higher contract assets due to the timing of software revenue recognition.

• Current portion of long-term debt decreased primarily due to $2,813 million of repayments, offset in part by $1,245 million becoming due within the next twelve months.

• Other current liabilities decreased primarily from lower contract liabilities as software revenue was recognized from previous software contracts.

Capital Returns

Fiscal Year Ended

Cash Dividends Declared and Paid October 29, 2023 October 30, 2022

Cash Dividends Declared and Paid November 3, 2024 October 29, 2023

(In millions, except per share data)

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Dividends to common stockholders $ 9,814 $ 7,645

Dividends per share to preferred stockholders $ — $ 80.00

Dividends to preferred stockholders $ — $ 299

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 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 through December 31, 2022, which was subsequently extended to 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.

The timing and amount of shares repurchased will depend on the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

We are not obligated to repurchase any specific amount of shares of common stock, and the stock repurchase programs may be suspended or terminated at any time.

During fiscal years 2024 and 2023, we repurchased and retired approximately 67 million and 91 million shares of our common stock for $7,176 million and $5,824 million, respectively.

All $20 billion of the authorized amount under these stock repurchase programs was utilized prior to expiration on December 31, 2023.

During fiscal years 2024 and 2023, we paid approximately $5,216 million and $1,861 million, respectively, in employee withholding taxes due upon the vesting of net settled equity awards.

We withheld approximately 3 million shares of common stock from employees in connection with such net share settlements during each of fiscal years 2023 and 2022.

We withheld approximately 38 million and 26 million shares of common stock from employees in connection with such net share settlements during fiscal years 2024 and 2023, respectively.

Fiscal Year Ended

October 29, 2023 October 30, 2022

November 3, 2024 October 29, 2023

(In millions)

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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.

The $1,877 million increase in cash provided by operations during fiscal year 2024 compared to fiscal year 2023 was primarily due to contributions from VMware.

The $8,187 million decrease in net income was largely driven by $13,058 million higher non-cash adjustments including amortization of intangible assets, stock-based compensation, and deferred taxes and other non-cash taxes related to the VMware Merger.

Investing Activities

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.

Cash flows from investing activities primarily consisted of cash used for acquisitions, proceeds from the sale of a business, capital expenditures, and proceeds and payments related to investments.

The $22,381 million increase in cash used in investing activities for fiscal year 2024 compared to fiscal year 2023 was primarily due to a $25,925 million increase in cash used for acquisitions due to the VMware Merger and the acquisition of Seagate’s SoC operations, net of cash acquired, offset in part by $3,485 million proceeds from the sale of the EUC business.

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 $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.

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

The $13,890 million increase in cash flows from financing activities for fiscal year 2024 compared to fiscal year 2023 was primarily due to $39,954 million of net proceeds from the 2023 Term Loans and the issuance of senior notes, offset in part by a $19,205 million increase in payments on debt obligations, a $3,355 million increase in employee withholding tax payments related to net settled equity awards, a $2,169 million increase in dividend payments, and a $1,352 million increase in stock repurchases.

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