Broadcom shares showed growth after the company released positive financial results for the first quarter of fiscal 2025 and optimistic guidance last Thursday, March 6, indicating continued demand for artificial intelligence.
The revenue of the mentioned firm, specializing in the development of semiconductor products and software solution infrastructure, for the fiscal quarter ended February 2 was recorded at the $14.91 million mark. This indicator showed an increase of 25% year-on-year. The LSEG consensus forecast stipulated that the company’s revenue for the mentioned period would be fixed at the $14.61 billion mark.
Broadcom’s net income, headquartered in Palo Alto, California, totaled $5.5 billion in the last fiscal quarter. A year earlier, this figure was recorded at the $1.32 billion mark.
Broadcom predicts that its revenue for the current fiscal quarter, which ends on May 4, will be about $14.9 billion. At the same time, the consensus forecast of analysts surveyed by the media provided that this figure will be fixed at the $14.6 billion mark.
In the report published by the company attention is drawn to the fact that the historical boom of spending on artificial intelligence continues. Broadcom is one of the beneficiaries of this process which has a technological origin and at the same time generates high financial performance in the process of its implementation. The company’s data center clients are actively making financial injections into the new infrastructure. It is also worth noting separately that artificial intelligence, being a virtual cognitive system, needs a material base, without which its existence and evolution are impossible, containing significant prospects, including the likelihood that at some point AI will surpass the human mind in terms of the ability to explore and comprehend the surrounding reality in a global sense of the corresponding definition.
Last year, against the backdrop of what can be called the world’s high-intensity focus on machine intelligence, Broadcom’s market capitalization crossed the $1 trillion mark. At the same time, in the current year, investors are showing caution regarding financial interaction with the artificial intelligence industry. It is important for them to get objective evidence that surge’s machine intelligence has legs.
Broadcom chief executive officer Hock Tan called artificial intelligence spending the main factor impacting the company’s earnings in the fiscal quarter that ended February 2. He stated that sales from that area will amount to $4.4 billion in the current period.
After the markets opened in New York on Friday, March 7, Broadcom shares showed growth of as much as 6.7%. In this case, the biggest intraday gain is observed in about a month. On Thursday, the company’s stocks closed at $179.45. This indicator has decreased by 23% since the beginning of the current year.
On Wednesday, March 5, information about earnings was published by Broadcom’s competitor, Marvell Technology, a semiconductor product developer based in Santa Clara, California. The company’s revenue for the fiscal quarter ended February 1 was recorded at the $1.81 billion mark. This indicator showed an increase of 27% year-on-year. The company expects its revenue for the current fiscal quarter to be fixed at the $1.87 billion mark, plus or minus 5%. At the same time, investors perceived the growth demonstrated by Marvell Technology in the last fiscal quarter as insufficient. Against this background, the company’s shares fell by 20% on Thursday.
Broadcom makes a variety of chips, including connectivity components for the iPhone and networking technology. At the same time, investors demonstrate the highest level of interest in the company’s custom design business. This unit of Broadcom helps data center customers develop chips that can create and run artificial intelligence software and services. The company is also currently a major supplier of software used by corporations to run their businesses and networks.
During a conference call with analysts, Hock Tan stated that Broadcom is ramping up the production of artificial intelligence chips for hyperscalers that are operators of giant data centers. According to him, the company’s custom semiconductors in some cases may demonstrate higher efficiency than accelerator microcircuits of general purpose sold by Nvidia.
According to Hock Tan, Broadcom is adding new hyperscaler customers. The company already has three existing clients in the relevant category and four more on the horizon, two of which are close to becoming revenue-generating customers. Hock Tan stated that hyperscale partners of the firm continue to invest actively.
Broadcom does not name its clients. At the same time, the media, citing analysts, claim that the company’s hyperscaler customers are Google, Meta Platforms, and ByteDance. Hock Tan stated that the United States’ forthcoming rules aimed at further restricting exports of artificial intelligence-related chips will have no impact on Broadcom’s clients.
Through a string of acquisitions, Hock Tan has built one of the most valuable companies in the microcircuits industry. He also has assembled a software unit that is currently approaching the scale of Broadcom’s semiconductor operations. This reach makes the firm’s forecast a bellwether for demand in the broader swath of the technology industry.
During the conference call, Hock Tan was asked about rumors circulating in the information space that Broadcom is currently considering the possibility of acquiring parts of Intel and other acquisitions in general. The head of the company said that he is currently focused on artificial intelligence and the integration of VMware, which Broadcom bought in 2023 as part of a deal worth approximately $69 billion. According to him, the firm is not currently thinking about plans that are the content of the mentioned rumors.
Broadcom’s semiconductor unit’s revenue for the last fiscal quarter was recorded at the $8.21 billion mark. This indicator showed an increase of 11% year-on-year.
The company’s infrastructure software business generated revenue of $6.7 billion in the fiscal quarter ended February 2. This indicator showed an increase of 47% year-on-year.
Broadcom sells components for cars, smartphones, and internet access gear. The company’s push into software includes products for mainframe computers, cybersecurity, and data center optimization.
Apple is one of Broadcom’s largest customers. During earnings calls, Hock Tan often talks about his company’s contentious relationship with the iPhone developer. It’s also worth noting that he calls Apple a large North American customer or another vague term.
The media published information according to which, starting next year, the iPhone developer will begin to abandon the key wireless chip from Broadcom. Apple is currently replacing external vendor components with in-house versions. The media reported that the corresponding tendency will also affect a chipmaker like Qualcomm. It is possible that over time, a kind of practice will be formed among technology companies, in which these firms will use their own components in the manufacturing of products. At the same time, the probability of such a practice being widespread is definitely not high.
Mizuho analysts called Broadcom a must-own AI stock in a note Friday. According to them, the latest earnings report and guidance make this company the standout among artificial intelligence stocks of semiconductor firms. It was also noted in this case that Broadcom avoided the weak gross margin guidance, which proved to impact Nvidia and did not face challenges in the supply chain, which became a sensitive problem for Marvell Technology. According to analysts, an important advantage of the company led by Hack Tan is its leadership in networking and custom silicon, which are two fast-growing areas in artificial intelligence infrastructure. They also stated that the potential of Broadcom earnings could push its equities to the range of $240-$250.
As we have reported earlier, AMD Publishes Earnings.
