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Broadcom, Inc. (NASDAQ: AVGO), a leading provider of semiconductor solutions for wired and wireless communications, recently impressed the market with upbeat financial outlook highlighting strong prospects for its AI business through 2027.
After the company reported earnings recently, the stock has outperformed market leaders like Nvidia, which has been the top performer for quite some time. The post-earnings rally drove AVGO to a record high of $250. Having gained a whopping 45% in the past 30 days alone, the stock still has room for growth as the tech firm continues expanding its AI business.
Strong Q4
In the fourth quarter of 2024, Broadcom’s earnings, excluding one-off items, were $1.42 per share, compared to $1.11 per share in the corresponding period a year earlier. On an unadjusted basis, net income rose to $4.32 billion or $0.90 per share in the fourth quarter from $3.52 billion or $0.83 per share in the prior-year quarter.
The bottom-line growth was driven by a 52% surge in Q4 revenues to $14.1 billion from $9.3 billion last year. Semiconductor Solutions revenue rose 12% annually, while Infrastructure Software revenue more than doubled. In a recent statement, the management said it expects a double-digit revenue increase for the first quarter of 2025.
The upbeat investor sentiment reflects the growing demand for Broadcom’s advanced AI XPUs and Ethernet networking portfolio. Meanwhile, the company has launched next-generation XPUs — in three nanometers — and is preparing to start volume shipment to its hyper-scale customers in the second half of fiscal 2025.
AI Leads
Broadcom is probably at the threshold of a major boom because hyperscalers working on their own AI chips would need the company’s semiconductor solutions like high-performance Ethernet switches and custom AI chips. It is estimated that each of the company’s three hyperscalers would deploy one million extreme processing unit clusters in 2027, representing an AI revenue serviceable addressable market for such chips in the range of $60 billion to $90 billion.
“As you know, we currently have three hyper-scale customers who have developed their own multi-generational AI XPU roadmap to be deployed at varying rates over the next three years. In 2027, we believe each of them plans to deploy one million XPU clusters across a single fabric. We expect this to represent an AI revenue serviceable addressable market, or SAM, for XPUs and network in the range of $60 billion to $90 billion in fiscal 2027 alone,” Broadcom’s CEO Hock Tan said at the Q4 2024 earnings conference call.
The 52-week average price of Broadcom’s stock is $150.18. The shares were trading up 2% on Tuesday afternoon, after opening the session at $232.35.
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