In the latest quarterly results, Broadcom reported a 43% year-over-year increase in revenue to $12.5 billion, exceeding analysts’ expectations. Adjusted earnings per share also grew by 6% to $10.96, surpassing forecasts. The company’s adjusted EBITDA for the quarter came in higher than Wall Street predictions. Broadcom is seen as a high-quality semiconductor and software company benefiting from strong demand in artificial intelligence and VMware. The company also has a shareholder-friendly approach to capital allocation, with dividends and buybacks. The stock trades at a more reasonable price-to-earnings ratio compared to other chip stocks.
Broadcom’s strong quarter further solidified its position as one of the best AI chip stocks in the market. The company’s AI-related business saw robust sales growth, leading management to raise its full-year outlook. While its legacy semiconductor business continues to face challenges, there are indications of improvement in the coming quarters. Broadcom’s acquisition of VMware has shown promising results, with the integration progressing well under the leadership of CEO Hock Tan. The company’s announcement of a 10-for-1 stock split reflects its commitment to making the stock more accessible to investors. As a result, analysts have raised their price target for Broadcom from $1,550 to $1,900.
Quarterly commentary from Broadcom highlighted growth in its semiconductor solutions revenue, driven by strong AI-related sales. The networking segment experienced significant revenue growth, with custom accelerator revenue up significantly year over year. The company’s legacy semiconductor businesses, such as wireless and server/storage connectivity, faced challenges but are expected to recover in the near future. Broadcom’s acquisition of VMware has started to show positive results, with revenue from the software segment growing. The company’s capital allocation strategy, including share repurchases and dividends, has been supported by strong cash generation.
Following a strong first half of fiscal year 2024, Broadcom raised its revenue and adjusted EBITDA outlook. The company now expects revenue to reach $51 billion, up from the previous estimate, with adjusted EBITDA projected to be approximately 61% of revenue. The revised outlook reflects a stronger outlook for AI revenue, which is expected to exceed $11 billion. Analysts view Broadcom’s revised guidance as conservative, suggesting potential for further growth. Overall, Broadcom’s performance in the latest quarter and outlook for the future indicate its position as a leading player in the semiconductor industry, driven by strong demand in AI and VMware.
