On Thursday, Broadcom pleasantly surprised investors by announcing better-than-expected earnings for their fourth quarter and revealing that their revenue from artificial intelligence had more than tripled over the year.
Following the announcement, Broadcom’s shares saw a significant boost. CEO Hock Tan shared that the company is now collaborating with three major cloud service providers to create custom AI chips, a statement that led to a 13% rise in after-hours trading.
Here’s a breakdown of how the company performed compared to the LSEG consensus estimates for the quarter ending November 3rd:
- Earnings per share: Actual figures stood at $1.42 on an adjusted basis, surpassing the anticipated $1.38.
- Revenue: The company reported $14.05 billion, slightly under the expected $14.09 billion.
Looking forward, Broadcom projects its first-quarter revenue to touch $14.6 billion, just edging over the average analyst estimate of $14.57 billion. Notably, their fourth-quarter revenue saw a robust 51% year-over-year increase, growing from $9.3 billion.
Their net income also saw a rise, hitting $4.32 billion, or 90 cents per share, which marks a 23% growth from the previous year’s $3.52 billion, or 83 cents per share.
Broadcom’s semiconductor solutions group, which encompasses their AI chips, reported a 12% increase in revenue, climbing to $8.23 billion from last year’s $8.03 billion. The company is benefitting from the major surge in demand for generative AI infrastructure, with AI revenue shooting up by 220% to $12.2 billion for the year. A portion of this growth is attributed to their ethernet networking products that connect vast arrays of AI chips.
During the earnings call, Tan highlighted a promising window of opportunity in AI over the next three years. He elaborated, "Massive specific hyperscalers have embarked on ventures to craft custom AI accelerators." Currently, Broadcom is working with three substantial clients on AI chip development, and Tan anticipates each will deploy around 1 million AI chips in networked clusters by 2027. The potential market for Broadcom’s AI chips—XPUs—and related networking components could range from $60 billion to $90 billion by 2027.
Broadcom’s infrastructure software division also recorded a significant revenue rise to $5.82 billion for the quarter. This almost triples the figure from last year’s $1.96 billion and factors in gains from the $69 billion acquisition of VMware completed earlier this year.
In addition to these developments, Broadcom announced plans to boost its quarterly dividend by 11% in fiscal 2025, raising it to 59 cents per share.
Be sure to watch as Broadcom shares surge following their earnings report.
