UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 6, 2018

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38449

	Broadcom Inc.
	(Exact name of registrant as specified in its charter)
Delaware		35-2617337
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
	1320 Ridder Park Drive San Jose, CA 95131-2313 (408) 433-8000
	(Address, including zip code, of principal executive offices and registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	þ	Accelerated filer	o	Non-accelerated filer	o	Smaller reporting company	o	Emerging growth company	o
				(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES o NO þ

As of June 1, 2018, there were 431,680,880 shares of our common stock, $0.001 par value per share, outstanding.

BROADCOM INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended May 6, 2018

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION	1
Item 1. Condensed Consolidated Financial Statements — Unaudited	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3. Quantitative and Qualitative Disclosures About Market Risk	47
Item 4. Controls and Procedures	47
PART II — OTHER INFORMATION	48
Item 1. Legal Proceedings	48
Item 1A. Risk Factors	48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3. Defaults Upon Senior Securities	66
Item 4. Mine Safety Disclosures	66
Item 5. Other Information	66
Item 6. Exhibits	67
SIGNATURES	71

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements — Unaudited

BROADCOM INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

	Page
Condensed Consolidated Balance Sheets — Unaudited	2
Condensed Consolidated Statements of Operations - Unaudited	3
Condensed Consolidated Statements of Comprehensive Income — Unaudited	4
Condensed Consolidated Statements of Cash Flows — Unaudited	5
Condensed Consolidated Statements of Stockholders’ Equity — Unaudited	6
Notes to Unaudited Condensed Consolidated Financial Statements	7

1

BROADCOM INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

	May 6, 2018			October 29, 2017
	(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	8,187		$	11,204
Trade accounts receivable, net	2,749			2,448
Inventory	1,235			1,447
Other current assets	303			724
Total current assets	12,474			15,823
Long-term assets:
Property, plant and equipment, net	2,720			2,599
Goodwill	26,908			24,706
Intangible assets, net	12,346			10,832
Other long-term assets	488			458
Total assets	$	54,936		$	54,418
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	836		$	1,105
Employee compensation and benefits	417			626
Current portion of long-term debt	117			117
Other current liabilities	754			681
Total current liabilities	2,124			2,529
Long-term liabilities:
Long-term debt	17,481			17,431
Other long-term liabilities	3,264			11,272
Total liabilities	22,869			31,232
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 100 shares authorized; none and 22 shares issued and outstanding as of May 6, 2018 and October 29, 2017, respectively	—			—
Common stock and additional paid-in capital, $0.001 par value; 2,900 shares authorized; 436 and 409 shares issued and outstanding as of May 6, 2018 and October 29, 2017, respectively	24,305			20,505
Retained earnings (accumulated deficit)	7,868			(129		)
Accumulated other comprehensive loss	(106		)	(91		)
Total Broadcom Inc. stockholders’ equity	32,067			20,285
Noncontrolling interest	—			2,901
Total stockholders’ equity	32,067			23,186
Total liabilities and stockholders’ equity	$	54,936		$	54,418

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED

	Fiscal Quarter Ended						Two Fiscal Quarters Ended
	May 6, 2018			April 30, 2017			May 6, 2018			April 30, 2017
	(In millions, except per share data)
Net revenue	$	5,014		$	4,190		$	10,341		$	8,329
Cost of products sold:
Cost of products sold	1,696			1,564			3,595			3,137
Purchase accounting effect on inventory	—			1			70			1
Amortization of acquisition-related intangible assets	765			639			1,480			1,198
Restructuring charges	2			10			17			16
Total cost of products sold	2,463			2,214			5,162			4,352
Gross margin	2,551			1,976			5,179			3,977
Research and development	936			829			1,861			1,637
Selling, general and administrative	294			204			585			405
Amortization of acquisition-related intangible assets	67			442			406			882
Restructuring, impairment and disposal charges	53			27			183			73
Total operating expenses	1,350			1,502			3,035			2,997
Operating income	1,201			474			2,144			980
Interest expense	(148		)	(112		)	(331		)	(223		)
Loss on extinguishment of debt	—			—			—			(159		)
Other income, net	46			3			81			34
Income from continuing operations before income taxes	1,099			365			1,894			632
Benefit from income taxes	(2,637		)	(103		)	(8,423		)	(93		)
Income from continuing operations	3,736			468			10,317			725
Loss from discontinued operations, net of income taxes	(3		)	(4		)	(18		)	(9		)
Net income	3,733			464			10,299			716
Net income attributable to noncontrolling interest	15			24			351			37
Net income attributable to common stock	$	3,718		$	440		$	9,948		$	679
Basic income (loss) per share:
Income per share from continuing operations	$	8.84		$	1.10		$	24.01		$	1.72
Loss per share from discontinued operations	(0.01		)	(0.01		)	(0.04		)	(0.03		)
Net income per share	$	8.83		$	1.09		$	23.97		$	1.69
Diluted income (loss) per share:
Income per share from continuing operations	$	8.34		$	1.06		$	23.03		$	1.65
Loss per share from discontinued operations	(0.01		)	(0.01		)	(0.04		)	(0.02		)
Net income per share	$	8.33		$	1.05		$	22.99		$	1.63
Weighted-average shares:
Basic	421			403			415			401
Diluted	448			442			448			440
Cash dividends declared and paid per share	$	1.75		$	1.02		$	3.50		$	2.04

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME — UNAUDITED

	Fiscal Quarter Ended					Two Fiscal Quarters Ended
	May 6, 2018			April 30, 2017		May 6, 2018		April 30, 2017
	(In millions)
Net income	$	3,733		$	464	$	10,299	$	716
Other comprehensive income (loss), net of tax:
Change in unrealized gain on available-for-sale investments	(9		)	—		—		—
Amortization of actuarial loss and prior service costs associated with defined benefit pension plans and post-retirement benefit plans	1			1		1		1
Other comprehensive income (loss)	(8		)	1		1		1
Comprehensive income	3,725			465		10,300		717
Comprehensive income attributable to noncontrolling interest	15			24		351		37
Comprehensive income attributable to common stock	$	3,710		$	441	$	9,949	$	680

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

	Two Fiscal Quarters Ended
	May 6, 2018			April 30, 2017
	(In millions)
Cash flows from operating activities:
Net income	$	10,299		$	716
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,148			2,307
Stock-based compensation	595			418
Deferred taxes and other non-cash taxes	(8,534		)	(111		)
Non-cash portion of debt extinguishment loss	—			159
Non-cash restructuring, impairment and disposal charges	10			40
Amortization of debt issuance costs and accretion of debt discount	12			14
Other	17			(15		)
Changes in assets and liabilities, net of acquisitions and disposals:
Trade accounts receivable, net	(78		)	108
Inventory	306			96
Accounts payable	(312		)	(251		)
Employee compensation and benefits	(292		)	(53		)
Contributions to defined benefit pension plans	(129		)	(11		)
Other current assets and current liabilities	354			(391		)
Other long-term assets and long-term liabilities	(398		)	(90		)
Net cash provided by operating activities	3,998			2,936
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired	(4,786		)	(37		)
Proceeds from sales of businesses	782			10
Purchases of property, plant and equipment	(409		)	(581		)
Proceeds from disposals of property, plant and equipment	238			—
Purchases of investments	(249		)	(200		)
Proceeds from sale of investment	54			—
Other	(12		)	(4		)
Net cash used in investing activities	(4,382		)	(812		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	—			13,446
Repayment of debt	(856		)	(13,668		)
Payment of debt issuance costs	—			(23		)
Dividend and distribution payments	(1,521		)	(868		)
Repurchases of common stock	(347		)	—
Issuance of common stock, net	112			150
Payment of capital lease obligations	(21		)	(4		)
Net cash used in financing activities	(2,633		)	(967		)
Net change in cash and cash equivalents	(3,017		)	1,157
Cash and cash equivalents at beginning of period	11,204			3,097
Cash and cash equivalents at end of period	$	8,187		$	4,254

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

BROADCOM INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — UNAUDITED

	Preferred Stock				Common Stock and Additional Paid-in Capital					Retained Earnings/(Accumulated Deficit)			Accumulated Other Comprehensive Loss			Noncontrolling Interest			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount
	(In millions)
Balance as of October 29, 2017	22		$	—	409		$	20,505		$	(129	)	$	(91	)	$	2,901		$	23,186
Net income	—		—		—		—			6,230			—			336			6,566
Other comprehensive income	—		—		—		—			—			9			—			9
Cumulative effect of accounting change	—		—		—		—			(252		)	—			(14		)	(266		)
Cash dividends declared and paid to common stockholders	—		—		—		—			(717		)	—			—			(717		)
Cash distribution declared and paid by Broadcom Cayman L.P. on exchangeable limited partnership units	—		—		—		—			—			—			(38		)	(38		)
Exchange of exchangeable limited partnership units for common stock	—		—		—		5			—			—			(5		)	—
Issuance of common stock in connection with equity incentive plans	—		—		1		34			—			—			—			34
Stock-based compensation	—		—		—		299			—			—			—			299
Fair value of partially vested equity awards assumed in connection with the acquisition of Brocade Communications Systems, Inc.	—		—		—		8			—			—			—			8
Balance as of February 4, 2018	22		—		410		20,851			5,132			(82		)	3,180			29,081
Net income	—		—		—		—			3,718			—			15			3,733
Other comprehensive loss	—		—		—		—			—			(8		)	—			(8		)
Cumulative effect of accounting change	—		—		—		—			15			(16		)	1			—
Cash dividends declared and paid to common stockholders	—		—		—		—			(727		)	—			—			(727		)
Cash distribution declared and paid by Broadcom Cayman L.P. on exchangeable limited partnership units	—		—		—		—			—			—			(39		)	(39		)
Exchange of exchangeable limited partnership units for common stock and redemption of preferred stock due to the Redomiciliation Transaction	(22	)	—		22		3,157						—			(3,157		)	—
Issuance of common stock in connection with equity incentive plans, net	—		—		6		78			—			—			—			78
Stock-based compensation	—		—		—		296			—			—			—			296
Repurchases of common stock	—		—		(2	)	(77		)	(270		)	—			—			(347		)
Balance as of May 6, 2018	—		$	—	436		$	24,305		$	7,868		$	(106	)	$	—		$	32,067

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

BROADCOM INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Overview, Basis of Presentation and Significant Accounting Policies

Overview

Broadcom Inc., a Delaware corporation, is the successor to Broadcom Limited, a company organized under the laws of the Republic of Singapore, or Broadcom-Singapore. As part of the plan to cause the publicly traded parent company of Broadcom to be a Delaware corporation, or the Redomiciliation Transaction, after the close of market trading on April 4, 2018, Broadcom Inc. and Broadcom-Singapore completed a statutory scheme of arrangement under Singapore law, or the Scheme of Arrangement. Pursuant to the Scheme of Arrangement, all Broadcom-Singapore ordinary shares outstanding immediately prior to the effective time of the Scheme of Arrangement were exchanged on a one-for-one basis for newly issued shares of Broadcom Inc. common stock and Broadcom-Singapore became an indirect wholly-owned subsidiary of Broadcom Inc.

In conjunction with the Redomiciliation Transaction and pursuant to an amendment to the Amended and Restated Limited Partnership Agreement of Broadcom Cayman L.P., or the Partnership, all outstanding exchangeable limited partnership units, or LP Units, were mandatorily exchanged, or the Mandatory Exchange, on a one-for-one basis for newly issued shares of Broadcom Inc. common stock immediately prior to the effective time of the Scheme of Arrangement. As a result, all limited partners of the Partnership became common stockholders of Broadcom Inc. In addition, all related outstanding special preference shares of Broadcom-Singapore were automatically redeemed pursuant to Broadcom-Singapore’s governing documents upon the Mandatory Exchange of the LP Units. Consequently, the limited partners no longer hold a noncontrolling interest in the Partnership and we subsequently deregistered the Partnership.

The Scheme of Arrangement was accounted for as an exchange of equity interests among entities under common control. All assets and liabilities of Broadcom-Singapore were assumed by Broadcom Inc., resulting in the retention of the historical basis of accounting as if they had always been combined for accounting and financial reporting purposes.

The financial statements for periods prior to April 4, 2018, the effective date of the Redomiciliation Transaction, relate to Broadcom-Singapore and relate to Broadcom Inc. for the period after April 4, 2018. Unless stated otherwise or the context otherwise requires, references to “Broadcom,” “we,” “our” and “us” mean Broadcom Inc. and its consolidated subsidiaries from and after the effective time of the Redomiciliation Transaction and, prior to that time, to our predecessor, Broadcom-Singapore.

We are a leading designer, developer and global supplier of a broad range of 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 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. We have four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & other, which align with our principal target markets.

Basis of 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 year ending November 4, 2018, or fiscal year 2018, is a 53-week fiscal year, with our first fiscal quarter containing 14 weeks. The first quarter of our fiscal year 2018 ended on February 4, 2018, the second quarter ended on May 6, 2018 and the third quarter ends on August 5, 2018. Our fiscal year ended October 29, 2017, or fiscal year 2017, was a 52-week fiscal year.

On November 17, 2017, we acquired Brocade Communications Systems, Inc., or Brocade. The unaudited condensed consolidated financial statements include the results of operations of Brocade commencing as of the acquisition date. See Note 2. “Acquisition of Brocade” for additional information.

7

The accompanying condensed consolidated financial statements include the accounts of Broadcom and our subsidiaries, and have been prepared by us in accordance with generally accepted accounting principles in the United States, or GAAP, for interim financial information. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The October 29, 2017 condensed consolidated balance sheet data were derived from Broadcom-Singapore’s audited consolidated financial statements included in its Annual Report on Form 10-K for fiscal year 2017 as filed with the Securities and Exchange Commission, or SEC, but do not include all disclosures required by GAAP. All intercompany transactions and balances have been eliminated in consolidation. The operating results for the fiscal quarter and two fiscal quarters ended May 6, 2018 are not necessarily indicative of the results that may be expected for fiscal year 2018, or for any other future period.

Significant Accounting Policies

Use of estimates. The preparation of condensed consolidated financial statements in conformity with GAAP requires management 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.

Reclassifications. Certain reclassifications have been made to the prior period condensed consolidated statement of cash flows. These reclassifications had no impact on the previously reported net cash activities.

Recently Adopted Accounting Guidance

In the first quarter of fiscal year 2018, we early adopted guidance issued by the Financial Accounting Standards Board, or FASB, in October 2016 related to the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. The standard requires a modified-retrospective transition method by means of a cumulative-effect adjustment as of the beginning of the period in which the guidance is adopted. The adoption of this guidance resulted in a decrease in current and long-term prepaid tax expense of $67 million and $199 million, respectively, an increase of $252 million to our accumulated deficit and a decrease of $14 million to our noncontrolling interest.

In the second quarter of fiscal year 2018, we early adopted guidance issued by the FASB in February 2018 that allows companies to reclassify stranded income tax effects resulting from the U.S. Tax Cuts and Jobs Act, or the 2017 Tax Reform Act, from accumulated other comprehensive loss to retained earnings. The stranded income tax effects resulted from the change in the federal tax rate for deferred taxes recorded in accumulated other comprehensive loss. The adoption of this guidance resulted in a cumulative-effect adjustment as of the beginning of the second quarter of fiscal year 2018, which consisted of an increase to our accumulated other comprehensive loss of $16 million, an increase to retained earnings of $15 million and a $1 million increase to noncontrolling interest.

Recent Accounting Guidance Not Yet Adopted

In August 2016, the FASB issued guidance related to the classification of certain transactions on the statement of cash flows. This guidance will be effective for the first quarter of our fiscal year 2019 on a retrospective basis; and early adoption is permitted. We do not intend to adopt this guidance early and will present our statements of cash flows in accordance with this guidance upon adoption.

In February 2016, the FASB issued guidance related to the accounting for leases, which among other things, requires a lessee to recognize lease assets and lease liabilities on the balance sheet for operating leases. This guidance will be effective for the first quarter of our fiscal year 2020. The new guidance is required to be applied using a modified retrospective approach. We are evaluating the impact this guidance will have on our condensed consolidated financial statements.

In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The new standard creates a single source of revenue guidance under GAAP, eliminating industry-specific guidance. The underlying principle of the standard is to recognize revenue when a customer obtains control of promised goods or services at an amount that reflects the consideration that is expected to be received in exchange for those goods or services. An entity should apply a five-step approach for recognizing revenue as follows: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the entity satisfies a performance obligation. The standard also requires increased disclosures including the nature, amount, timing, and uncertainty of revenues and cash flows related to contracts with customers.

8

The standard allows two methods of adoption: (i) retrospectively to each prior period presented (“full retrospective method”), or (ii) retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption ("modified retrospective method"). We plan to adopt the new standard using the modified retrospective method at the beginning of the first quarter of fiscal year 2019. We have established a cross-functional team to assess the potential impact of the new revenue standard and are on schedule in establishing new accounting policies, processes, and internal controls necessary to support the requirements of the new standard. While we are still finalizing our analysis to quantify the adoption impact of the provisions of the new standard, the exact impact of the new standard will be dependent on facts and circumstances at adoption and could vary from quarter to quarter.

2. Acquisition of Brocade

On November 17, 2017, or the Brocade Acquisition Date, we acquired Brocade, or the Brocade Merger. Brocade was a supplier of networking hardware, software and services, including Fibre Channel Storage Area Network, or FC SAN, solutions and Internet Protocol Networking, or IP Networking, solutions. We acquired Brocade to enhance our position as a provider of enterprise storage connectivity solutions, broaden our portfolio for enterprise storage, and to increase our ability to address the evolving needs of our original equipment manufacturer, or OEM, customers. We financed the Brocade Merger with a portion of the net proceeds from the issuance of the 2017 Senior Notes, as defined and discussed in further detail in Note 6. “Borrowings,” as well as cash on hand.

Purchase Consideration

	(In millions)
Cash paid for outstanding Brocade common stock	$	5,298
Cash paid by Broadcom to retire Brocade’s term loan	701
Cash paid for Brocade equity awards	31
Fair value of partially vested assumed equity awards	8
Total purchase consideration	6,038
Less: cash acquired	1,250
Total purchase consideration, net of cash acquired	$	4,788

We assumed all unvested Brocade stock options, restricted stock units, or RSUs, and performance stock units, or PSUs, held by continuing employees. The portion of the fair value of partially vested equity awards associated with prior service of Brocade employees represents a component of the total consideration as presented above. All vested in-the-money Brocade stock options, after giving effect to any acceleration, were cashed out upon the completion of the Brocade Merger. RSUs and PSUs were valued based on our share price as of the Brocade Acquisition Date.

We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identified intangible assets acquired was based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, such as finalization of the estimated fair value of tax related items, we may further revise our preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from the Brocade Acquisition Date). Any such revisions or changes may be material.

9

The following table presents our preliminary allocation of the total purchase price, net of cash acquired:

	Estimated Fair Value
	(In millions)
Current assets	$	1,294
Goodwill	2,189
Intangible assets	3,396
Other long-term assets	79
Total assets acquired	6,958
Current portion of long-term debt	(856		)
Other current liabilities	(370		)
Long-term debt	(38		)
Other long-term liabilities	(906		)
Total liabilities assumed	(2,170		)
Fair value of net assets acquired	$	4,788

Goodwill was primarily attributable to the assembled workforce and anticipated synergies and economies of scale expected from the integration of the Brocade business. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the Brocade Merger. Goodwill is not expected to be deductible for tax purposes.

Current assets included assets held-for-sale related to Brocade’s IP Networking business, which was not aligned with our strategic objectives and was sold during our fiscal quarter ended February 4, 2018. The sale of Brocade’s IP Networking business is discussed further in Note 3. “Supplemental Financial Information.” Current assets also included assets held-for-sale for Brocade’s headquarters, which was sold for $224 million during the first quarter of fiscal year 2018, for no gain or loss. We leased back a portion of the campus at market rental rates for six months.

Revenue from the Brocade acquisition has been included primarily in our enterprise storage segment. Transaction costs of $8 million and $29 million related to the Brocade Merger were included in selling, general and administrative expense for the fiscal quarter and two fiscal quarters ended May 6, 2018, respectively.

Intangible Assets

	Fair Value		Weighted-Average Amortization Periods
	(In millions)		(In years)
Developed technology	$	2,925	10
Customer contracts and related relationships	255		11
Trade name and other	61		6
Total identified finite-lived intangible assets	3,241
In-process research and development	155		N/A
Total identified intangible assets	$	3,396

Developed technology relates to products for FC SAN applications. We valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of Brocade. Customer contracts and related relationships were valued using the distributor method and the with-and-without-method under the income approach. The distributor method determines the fair value by measuring the economic profits generated by an intermediary, which in our case represents OEM customers. In the with-and-without method, the fair value was measured by the difference between the present values of the cash flows with and without the existing customers in place over the period of time necessary to reacquire the customers. In both instances, the economic useful life was determined based on historical customer turnover rates.

10

Trade name relates to the “Brocade” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This valuation method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods.

The fair value of in-process research and development, or IPR&D, was determined using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the contribution of other assets to those cash flows.

We believe the amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of the Brocade Acquisition Date.

The following table summarizes the details of IPR&D by category:

Description	IPR&D		Percentage of Completion		Estimated Cost to Complete		Expected Release Date (By Fiscal Year)
	(Dollars in millions)
Directors	$	64	72	%	$	45	2019
Switches	$	50	81	%	$	21	2018
Embedded	$	31	74	%	$	22	2019
Networking software	$	10	73	%	$	27	2018

The discount rate of 11% was applied to the projected cash flows to reflect the risk related to these IPR&D projects. The discount rate represents a premium of 1% over the weighted-average cost of capital to reflect the higher risk and uncertainty of the cash flows for IPR&D relative to the overall businesses.

Unaudited Pro Forma Information

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Brocade had been acquired as of the beginning of fiscal year 2017. The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to stock-based compensation expense, the purchase accounting effect on inventory acquired, restructuring charges related to the acquisition and transaction costs. For fiscal year 2017, non-recurring pro forma adjustments directly attributable to the Brocade Merger included (i) the purchase accounting effect of inventory acquired of $70 million and (ii) acquisition costs of $76 million. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2017 or of the results of our future operations of the combined business.

	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	May 6, 2018		April 30, 2017		May 6, 2018		April 30, 2017
	(In millions)
Pro forma net revenue	$	5,017	$	4,662	$	10,464	$	9,301
Pro forma net income attributable to common stock	$	3,744	$	442	$	10,077	$	554

3. Supplemental Financial Information

Cash Equivalents

Cash equivalents included $4,362 million and $6,002 million of time deposits as of May 6, 2018 and October 29, 2017, respectively. As of May 6, 2018 and October 29, 2017, cash equivalents also included $402 million and $401 million of money-market funds, respectively. For time deposits, carrying value approximates fair value due to the short-term nature of the instruments. The fair value of money-market funds, which was consistent with their carrying value, was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.

11

Accounts Receivable Factoring

In connection with a factoring agreement with a third-party financial institution, we sell certain of our trade accounts receivable on a non-recourse basis. We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the condensed consolidated statements of cash flows. Total trade accounts receivable sold under the factoring agreement were $57 million during the fiscal quarter and two fiscal quarters ended May 6, 2018. Factoring fees for the sales of receivables were recorded in other income, net and were not material.

Inventory

	May 6, 2018		October 29, 2017
	(In millions)
Finished goods	$	510	$	562
Work-in-process	542		696
Raw materials	183		189
Total inventory	$	1,235	$	1,447

Other current assets

	May 6, 2018		October 29, 2017
	(In millions)
Prepaid expenses	$	174	$	440
Other receivables	87		155
Other	42		129
Total other current assets	$	303	$	724

Accrued Rebate Activity

	Two Fiscal Quarters Ended
	May 6, 2018			April 30, 2017
	(In millions)
Beginning balance	$	124		$	317
Charged as a reduction of revenue	64			120
Reversal of unclaimed rebates	(10		)	(36		)
Payments	(125		)	(222		)
Ending balance	$	53		$	179

We recorded customer rebate charges of $25 million and $56 million in the fiscal quarters ended May 6, 2018 and April 30, 2017, respectively.

Other Long-Term Liabilities

	May 6, 2018		October 29, 2017
	(In millions)
Deferred tax liabilities (a)	$	266	$	10,019
Unrecognized tax benefits (a) (b)	2,700		1,011
Other	298		242
Total other long-term liabilities	$	3,264	$	11,272

________________________________

(a) Refer to Note 8. “Income Taxes” for additional information regarding these balances.

(b) Includes accrued interest and penalties.

12

Discontinued Operations

On December 1, 2017, we sold Brocade’s IP Networking business to ARRIS International plc, or ARRIS, for cash consideration of $800 million, adjusted for closing working capital balances. In connection with this sale, we indemnified ARRIS for $116 million of potential income tax liabilities. We provided transitional services as short-term assistance to ARRIS in assuming the operations of the purchased business. We do not have any material continuing involvement with this business and have presented its results in discontinued operations.

The following table summarizes the selected financial information of discontinued operations:

	Fiscal Quarter Ended						Two Fiscal Quarters Ended
	May 6, 2018			April 30, 2017			May 6, 2018			April 30, 2017
	(In millions)
Net revenue	$	—		$	3		$	18		$	5
Loss from discontinued operations	$	(3	)	$	(4	)	$	(18	)	$	(9	)

Supplemental Cash Flow Information

	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	May 6, 2018		April 30, 2017		May 6, 2018		April 30, 2017
	(In millions)
Cash paid for interest	$	1	$	1	$	233	$	103
Cash paid for income taxes	$	87	$	121	$	196	$	218

At May 6, 2018 and October 29, 2017, we had $27 million and $122 million, respectively, of unpaid purchases of property, plant and equipment included in accounts payable and other current liabilities.

4. Goodwill and Intangible Assets

Goodwill

	Wired Infrastructure		Wireless Communications		Enterprise Storage		Industrial & Other		Total
	(In millions)
Balance as of October 29, 2017	$	17,622	$	5,945	$	995	$	144	$	24,706
Brocade Merger	70		—		2,119		—		2,189
Other acquisition	13		—		—		—		13
Balance as of May 6, 2018	$	17,705	$	5,945	$	3,114	$	144	$	26,908

During the two fiscal quarters ended May 6, 2018, we made one immaterial acquisition in addition to the Brocade Merger.

13

Intangible Assets

	Gross Carrying Amount		Accumulated Amortization			Net Book Value
	(In millions)
As of May 6, 2018:
Purchased technology	$	15,770	$	(5,295	)	$	10,475
Customer contracts and related relationships	1,792		(770		)	1,022
Trade names	578		(143		)	435
Other	151		(37		)	114
Intangible assets subject to amortization	18,291		(6,245		)	12,046
IPR&D	300		—			300
Total	$	18,591	$	(6,245	)	$	12,346
As of October 29, 2017:
Purchased technology	$	12,724	$	(4,265	)	$	8,459
Customer contracts and related relationships	4,240		(3,100		)	1,140
Trade names	528		(117		)	411
Other	135		(25		)	110
Intangible assets subject to amortization	17,627		(7,507		)	10,120
IPR&D	712		—			712
Total	$	18,339	$	(7,507	)	$	10,832

Based on the amount of intangible assets subject to amortization at May 6, 2018, the expected amortization expense for each of the next five years and thereafter was as follows:

Fiscal Year:	Expected Amortization Expense
	(In millions)
2018 (remainder)	$	1,669
2019	2,872
2020	2,424
2021	1,930
2022	1,425
Thereafter	1,726
Total	$	12,046

The weighted-average amortization periods remaining by intangible asset category were as follows:

Amortizable intangible assets:	May 6, 2018
	(In years)
Purchased technology	6
Customer contracts and related relationships	6
Trade names	12
Other	9

5. Net Income Per Share

Basic net income per share is computed by dividing net income attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of shares of common stock and potentially dilutive shares of common stock outstanding during the period.

14

Diluted shares include the dilutive effect of in-the-money stock options, RSUs and employee stock purchase plan rights under the Broadcom Limited Second Amended and Restated Employee Share Purchase Plan, as amended, or ESPP (together referred to as equity awards). Diluted shares also included shares issuable upon exchange of the LP Units for the periods presented prior to the effective time of Mandatory Exchange (refer to Note 7. “Stockholders’ Equity” for additional information).

The dilutive effect of equity awards is calculated based on the average stock price for each fiscal period, using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and to purchase shares under the ESPP and the amount of compensation cost for future service that we have not yet recognized are collectively assumed to be used to repurchase shares.

The dilutive effect of the LP Units was calculated using the if-converted method. The if-converted method assumed that the LP Units were converted at the beginning of the reporting period and included net income attributable to noncontrolling interest for the period.

15

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented:

	Fiscal Quarter Ended						Two Fiscal Quarters Ended
	May 6, 2018			April 30, 2017			May 6, 2018			April 30, 2017
Numerator - Basic:	(In millions, except per share data)
Income from continuing operations	$	3,736		$	468		$	10,317		$	725
Less: Income from continuing operations attributable to noncontrolling interest	15			24			352			37
Income from continuing operations attributable to common stock	3,721			444			9,965			688
Loss from discontinued operations, net of income taxes	(3		)	(4		)	(18		)	(9		)
Less: Loss from discontinued operations, net of income taxes, attributable to noncontrolling interest	—			—			(1		)	—
Loss from discontinued operations, net of income taxes, attributable to common stock	(3		)	(4		)	(17		)	(9		)
Net income attributable to common stock	$	3,718		$	440		$	9,948		$	679
Numerator - Diluted:
Income from continuing operations	$	3,736		$	468		$	10,317		$	725
Loss from discontinued operations, net of income taxes	(3		)	(4		)	(18		)	(9		)
Net income	$	3,733		$	464		$	10,299		$	716

Denominator:
Weighted-average shares outstanding - basic	421			403			415			401
Dilutive effect of equity awards	13			16			15			16
Exchange of noncontrolling interest	14			23			18			23
Weighted-average shares outstanding - diluted	448			442			448			440
Basic income (loss) per share:
Income per share from continuing operations	$	8.84		$	1.10		$	24.01		$	1.72
Loss per share from discontinued operations	(0.01		)	(0.01		)	(0.04		)	(0.03		)
Net income per share	$	8.83		$	1.09		$	23.97		$	1.69
Diluted income (loss) per share:
Income per share from continuing operations	$	8.34		$	1.06		$	23.03		$	1.65
Loss per share from discontinued operations	(0.01		)	(0.01		)	(0.04		)	(0.02		)
Net income per share	$	8.33		$	1.05		$	22.99		$	1.63

16

6. Borrowings

	As of May 6, 2018:					As of October 29, 2017:
	Effective Interest Rate		Aggregate Principal Amount			Effective Interest Rate		Aggregate Principal Amount
	(In millions, except for percentages)
2017 Senior Notes
Fixed rate 2.375% notes due January 2020	2.615	%	$	2,750		2.615	%	$	2,750
Fixed rate 2.200% notes due January 2021	2.406	%	750			2.406	%	750
Fixed rate 3.000% notes due January 2022	3.214	%	3,500			3.214	%	3,500
Fixed rate 2.650% notes due January 2023	2.781	%	1,000			2.781	%	1,000
Fixed rate 3.625% notes due January 2024	3.744	%	2,500			3.744	%	2,500
Fixed rate 3.125% notes due January 2025	3.234	%	1,000			3.234	%	1,000
Fixed rate 3.875% notes due January 2027	4.018	%	4,800			4.018	%	4,800
Fixed rate 3.500% notes due January 2028	3.596	%	1,250			3.596	%	1,250
			17,550					17,550
Assumed BRCM Senior Notes
Fixed rate 2.70% notes due November 2018	2.70	%	117			2.70	%	117
Fixed rate 2.50% - 4.50% notes due August 2022 - August 2034	2.50% - 4.50%		22			2.50% - 4.50%		22
			139					139
Assumed Brocade Convertible Notes
Fixed rate 1.375% convertible notes due January 2020	0.628	%	38					—
Total principal amount outstanding			17,727					17,689
Less: Unaccreted discount and unamortized debt issuance costs			(129		)			(141		)
Total carrying value of debt			$	17,598				$	17,548

Senior Notes and Assumed BRCM Senior Notes

In fiscal year 2017, Broadcom Corporation, or BRCM, and Broadcom Cayman Finance Limited, or together with BRCM referred to as the Subsidiary Issuers, completed the issuance and sale of senior unsecured notes, or the 2017 Senior Notes, in an aggregate principal amount of $17,550 million. Our 2017 Senior Notes were fully and unconditionally guaranteed, jointly and severally, on an unsecured, unsubordinated basis by Broadcom-Singapore and the Partnership, subject to certain release conditions described in the indentures governing the 2017 Senior Notes, or the 2017 Indentures. On April 9, 2018, Broadcom Inc., or Parent Guarantor, became a guarantor of the 2017 Senior Notes and entered into supplemental indentures with the Subsidiary Issuers and the trustee of the 2017 Senior Notes. At that time, Broadcom-Singapore, a guarantor at the issuance of the 2017 Senior Notes, became an indirect wholly-owned subsidiary of Broadcom Inc. and a subsidiary guarantor, or Subsidiary Guarantor. In addition, the Partnership was released from its guarantee of the 2017 Senior Notes under each of the 2017 Indentures in accordance with their terms. Each series of 2017 Senior Notes pays interest semi-annually in cash in arrears on January 15 and July 15 of each year. As of May 6, 2018 and October 29, 2017, we accrued interest payable of $194 million and $136 million, respectively.

We may redeem all or a portion of our 2017 Senior Notes at any time prior to their maturity, subject to a specified make-whole premium as set forth in the 2017 Indentures. In the event of a change of control triggering event, holders of our 2017 Senior Notes will have the right to require us to purchase for cash all or a portion of their 2017 Senior Notes at a redemption price of 101% of the aggregate principal amount of such 2017 Senior Notes plus accrued and unpaid interest. The 2017 Indentures also contain covenants that restrict, among other things, the ability of Broadcom and our subsidiaries to incur certain secured debt and consummate certain sale and leaseback transactions, and the ability of the Parent Guarantor, the Subsidiary Issuers and the Subsidiary Guarantor to merge, consolidate or sell all or substantially all of their assets.

17

In connection with the issuance of the 2017 Senior Notes, we entered into registration rights agreements, pursuant to which we were obligated to use commercially reasonable efforts to file with the SEC, and cause to be declared effective, a registration statement with respect to an offer to exchange, or the Exchange Offer, each series of 2017 Senior Notes for notes that are registered with the SEC, or the Registered Notes, with substantially identical terms. On January 9, 2018, we launched the Exchange Offer and on February 21, 2018, substantially all of the 2017 Senior Notes were tendered and exchanged for Registered Notes in the Exchange Offer.

We were in compliance with all of the covenants related to the 2017 Senior Notes and senior unsecured notes assumed in the connection with acquisition of BRCM, or the Assumed BRCM Senior Notes, as of May 6, 2018.

Assumed Brocade Debt

As a result of the Brocade Merger, we assumed $575 million in aggregate principal amount of Brocade’s 1.375% convertible senior unsecured notes due 2020, or the Assumed Brocade Convertible Notes. The Brocade Merger was a “fundamental change” as well as a “make-whole fundamental change” as defined under the terms of the indenture governing the Assumed Brocade Convertible Notes. Accordingly, the holders of the Assumed Brocade Convertible Notes received the right to require us to repurchase their notes for cash. In the first quarter of fiscal year 2018, we repurchased $537 million in aggregate principal amount for $548 million at a conversion rate of $1,018 for each $1,000 of principal surrendered for conversion. As of May 6, 2018, the outstanding principal amount of the Assumed Brocade Convertible Notes was $38 million. The remaining outstanding Assumed Brocade Convertible Notes are convertible into cash at a conversion rate of $812 for each $1,000 of principal. We were in compliance with all of the covenants related to the Assumed Brocade Convertible Notes as of May 6, 2018.

We also assumed $300 million in aggregate principal amount of Brocade’s 4.625% senior unsecured notes due 2023. On January 16, 2018, we called and redeemed all of these outstanding notes for a total payment of $308 million, including the redemption price.

Fair Value of Debt

As of May 6, 2018, the estimated aggregate fair value of the 2017 Senior Notes, the Assumed BRCM Senior Notes and the Assumed Brocade Convertible Notes was $17,024 million and was primarily classified as Level 2 as we used quoted prices from less active markets.

Future Principal Payments of Debt

The future scheduled principal payments for the outstanding 2017 Senior Notes, Assumed BRCM Senior Notes and Assumed Brocade Convertible Notes as of May 6, 2018 were as follows:

Fiscal Year:	Future Scheduled Principal Payments
	(In millions)
2018 (remainder)	$	117
2019	—
2020	2,788
2021	750
2022	3,509
Thereafter	10,563
Total	$	17,727

7. Stockholders’ Equity

Completion of the Redomiciliation Transaction

For the period prior to the Redomiciliation Transaction, our stockholders’ equity reflects Broadcom-Singapore’s outstanding ordinary shares, all of which were publicly traded on the NASDAQ Global Select Market. After the close of market trading on April 4, 2018, pursuant to the Scheme of Arrangement, all Broadcom-Singapore ordinary shares outstanding immediately prior to the effective time of Scheme of Arrangement were exchanged on a one-for-one basis for newly issued shares of Broadcom Inc. common stock and Broadcom-Singapore became an indirect wholly-owned subsidiary of Broadcom Inc.

18

In conjunction with the Redomiciliation Transaction and pursuant to the Mandatory Exchange, immediately prior to the effective time of the Scheme of Arrangement all outstanding LP Units held by the limited partners were mandatorily exchanged for approximately 22 million newly issued shares of Broadcom Inc. common stock on a one-for-one basis. As a result, all limited partners of the Partnership have become common stockholders of Broadcom Inc. In addition, all related outstanding special preference shares of Broadcom-Singapore were automatically redeemed pursuant to Broadcom-Singapore’s governing documents upon the Mandatory Exchange.

Noncontrolling Interest

As of October 29, 2017 and immediately prior to the effective time of the Scheme of Arrangement, the limited partners held a noncontrolling interest of approximately 5% in the Partnership through their ownership of LP Units. Accordingly, net income attributable to our common stock in our condensed consolidated statements of operations excludes the noncontrolling interest’s proportionate share of the results for the periods presented. In addition, we presented the proportionate share of equity attributable to the noncontrolling interest as a separate component of stockholders’ equity within our condensed consolidated balance sheet as of October 29, 2017 and condensed consolidated statements of stockholders’ equity for the periods immediately prior to the effective time of the Scheme of Arrangement.

Dividends and Distributions

	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	May 6, 2018		April 30, 2017		May 6, 2018		April 30, 2017
	(In millions, except per share data)
Cash dividends and distributions paid per share/unit	$	1.75	$	1.02	$	3.50	$	2.04
Cash dividends paid to stockholders	$	727	$	414	$	1,444	$	822
Cash distributions paid to limited partners	$	39	$	23	$	77	$	46

Stock Repurchase Program

In April 2018, our Board of Directors authorized the repurchase of up to $12 billion of our common stock from time to time on or prior to November 3, 2019, the end of our fiscal year 2019. Under our stock repurchase program, we repurchased and retired approximately 1.5 million shares of our common stock at a weighted average price of $230.50 in the fiscal quarter ended May 6, 2018. As of May 6, 2018, $11,653 million of the current authorization remained available under our stock repurchase program.

Repurchases under our stock repurchase program may be effected through a variety of methods, including open market or privately negotiated purchases. The timing and number of shares of common stock repurchased will depend on a variety of factors, including price, general business and market conditions and alternative investment opportunities. We are not obligated to repurchase any specific number of shares of common stock, and we may suspend or discontinue our repurchase program at any time.

Stock-Based Compensation Expense

	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	May 6, 2018		April 30, 2017		May 6, 2018		April 30, 2017
	(In millions)
Cost of products sold	$	21	$	15	$	41	$	29
Research and development	205		150		408		291
Selling, general and administrative	70		51		146		97
Total stock-based compensation expense	$	296	$	216	$	595	$	417

19

Equity Incentive Award Plans

A summary of time- and market-based RSU activity is as follows:

	Number of RSUs Outstanding		Weighted- Average Grant Date Fair Value Per Share
	(In millions, except per share data)
Balance as of October 29, 2017	18		$	163.42
Granted	7		$	240.87
Vested	(5	)	$	155.45
Forfeited	(1	)	$	161.95
Balance as of May 6, 2018	19		$	194.00

The aggregate fair value of time- and market-based RSUs that vested during the two fiscal quarters ended May 6, 2018 was $1,355 million, which represents the market value of our common stock on the date that the RSUs vested. The number of RSUs vested included shares of common stock that we withheld for settlement of employees’ withholding obligations due upon the vesting of RSUs. Total unrecognized compensation cost related to unvested RSUs as of May 6, 2018 was $3,048 million, which is expected to be recognized over the remaining weighted-average service period of 3.1 years.

A summary of time- and market-based stock option activity is as follows:

	Number of Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (In years)	Aggregate Intrinsic Value
	(In millions, except years and per share data)
Balance as of October 29, 2017	10			$	49.54
Exercised	(1	)		$	45.76		$	318
Cancelled	—		*	$	74.66
Balance as of May 6, 2018	9			$	50.08	2.41	$	1,593
Fully vested as of May 6, 2018	8			$	48.96	2.38	$	1,543
Fully vested and expected to vest as of May 6, 2018	9			$	50.08	2.41	$	1,593

________________________________

* Represents fewer than 0.5 million shares.

The total unrecognized compensation cost related to unvested stock options as of May 6, 2018 was $3 million, which is expected to be recognized over the remaining weighted-average service period of 0.5 years.

8. Income Taxes

For the fiscal quarter and two fiscal quarters ended May 6, 2018, our benefit from income taxes was $2,637 million and $8,423 million, respectively, compared to $103 million and $93 million for the fiscal quarter and two fiscal quarters ended April 30, 2017, respectively.

The benefit for the fiscal quarter ended May 6, 2018 included the impact from the April 4, 2018 completion of the Redomiciliation Transaction and related internal reorganizations. The impact included tax benefits from the reduction of $1,063 million in unrecognized federal tax benefits related to a one-time transition tax, or the Transition Tax, $431 million in the Transition Tax payable and $1,162 million from the remeasurement of withholding taxes on undistributed earnings, partially offset by a $91 million tax provision on foreign earnings and profit subject to U.S. tax.

The benefit from income taxes in the two fiscal quarters ended May 6, 2018 was principally a result of provisional income tax benefits realized from the enactment of the 2017 Tax Reform Act on December 22, 2017 and included the net deferred tax liabilities established in connection with the Brocade Merger.

20

The 2017 Tax Reform Act makes significant changes to the U.S. Internal Revenue Code, including, but not limited to, a decrease in the U.S. corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a participation exemption regime, and the Transition Tax on the mandatory deemed repatriation of accumulated non-U.S. earnings of U.S. controlled foreign corporations as of December 31, 2017.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, or SAB 118, to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Reform Act.

Based on our interpretation of the 2017 Tax Reform Act and available guidance, including SAB 118, we recorded a total provisional benefit of $7,303 million, which we believe was a reasonable estimate as of May 6, 2018. The provisional benefit includes $92 million related to the remeasurement of certain deferred tax assets and liabilities, which was based on the tax rates at which they are expected to be reversed in the future as a result of the 2017 Tax Reform Act. The provisional benefit also includes $7,212 million related to the Transition Tax, which was primarily due to a reduction of $10,392 million in our federal deferred income tax liabilities on accumulated non-U.S. earnings, partially offset by $2,116 million of federal provisional long-term Transition Tax payable and $1,116 million of unrecognized federal tax benefits related to the Transition Tax. The provisional benefit includes a $1,494 million reduction of the Transition Tax in the fiscal quarter ended May 6, 2018 primarily as a result of the completion of the Redomiciliation Transaction and related internal reorganizations. Additional detailed analysis of historical foreign earnings, as well as potential correlative adjustments is ongoing. Any subsequent adjustment to these amounts, which must be completed within 12 months of the enactment of the 2017 Tax Reform Act, will be recorded as a discrete adjustment to provision for (benefit from) income taxes in the period in which the analysis is complete.

In connection with the Brocade Merger, we established $845 million of net deferred tax liabilities on the excess of book basis over the tax basis of acquired identified intangible assets and investments in certain foreign subsidiaries that have not been indefinitely reinvested, partially offset by acquired tax attributes. The net deferred tax liabilities are based upon certain assumptions underlying our preliminary purchase price allocation. Upon finalization of the purchase price allocation, additional adjustments to the amount of our net deferred taxes may be required, provided we are within the measurement period.

We also recognized discrete benefits from the recognition of $127 million and $155 million of excess tax benefits from stock-based awards that were vested and/or exercised during the fiscal quarter and two fiscal quarters ended May 6, 2018, respectively.

The benefit from income taxes in the corresponding 2017 fiscal periods was primarily due to a discrete benefit from the recognition of $139 million and $181 million of excess tax benefits from stock-based awards that were vested and/or exercised during the fiscal quarter and two fiscal quarters ended April 30, 2017, respectively.

Uncertain Tax Positions

The balance of gross unrecognized tax benefits was $3,430 million and $2,256 million as of May 6, 2018 and October 29, 2017, respectively. Gross unrecognized tax benefits increased by $1,174 million compared to the balance as of October 29, 2017, primarily due to the recognition of uncertain tax positions related to the Transition Tax and to a lesser extent, the Brocade Merger, which were initially estimated as of the Brocade Acquisition Date. We continue to reevaluate these items with any adjustments to our preliminary estimates recognized, provided we are within the measurement period and we continue to collect information in order to determine their estimated values.

Accrued interest and penalties are included in other long-term liabilities on the condensed consolidated balance sheets. As of May 6, 2018 and October 29, 2017, the combined amount of cumulative accrued interest and penalties was approximately $155 million and $132 million, respectively.

A portion of our unrecognized tax benefits will affect our effective tax rate if they are recognized upon favorable resolution of the uncertain tax positions. As of May 6, 2018 and October 29, 2017, approximately $3,586 million and $2,388 million, respectively, of the unrecognized tax benefits, including accrued interest and penalties, would affect our effective tax rate if favorably resolved.

We are subject to U.S. income tax examination for fiscal years 2010 and later. Certain of our acquired companies are subject to tax examinations in major jurisdictions outside the United States for fiscal years 2013 and later. It is possible that our existing unrecognized tax benefits may change by up to $257 million as a result of lapses of statutes of limitations for certain audit periods and/or audit examinations expected to be completed within the next 12 months.

21

9. Segment Information

Reportable Segments

We have four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & other. These segments align with our principal target markets. The segments represent components for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer of Broadcom, who has been identified as the Chief Operating Decision Maker, or the CODM, as defined by authoritative guidance on segment reporting, in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics.

In the first quarter of fiscal year 2018, we completed the Brocade Merger. The operating results are reported primarily within the enterprise storage segment. See Note 2. “Acquisition of Brocade" for additional information.

Our CODM assesses the performance of each segment and allocates resources to those segments based on net revenue and operating results and does not evaluate our segments using discrete asset information. Operating results by segment include items that are directly attributable to each segment. Operating results by segment also include shared expenses such as global operations, including manufacturing support, logistics and quality control, in addition to expenses associated with selling, general and administrative activities for the business, which are allocated primarily based on revenue, while facilities expenses are primarily allocated based on site-specific headcount.

Unallocated Expenses

Unallocated expenses include amortization of acquisition-related intangible assets, stock-based compensation expense, restructuring, impairment and disposal charges, acquisition-related costs, charges related to inventory step-up to fair value, and other costs, which are not used in evaluating the results of, or in allocating resources to, our segments. Acquisition-related costs also include transaction costs and any costs directly related to the acquisition and integration of acquired businesses.

Depreciation expense directly attributable to each reportable segment is included in operating results for each segment. However, the CODM does not evaluate depreciation expense by operating segment and, therefore, it is not separately presented. There was no inter-segment revenue. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Fiscal Quarter Ended Two Fiscal Quarters Ended