Broadcom, Inc. (NASDAQ: AVGO), a prominent player in semiconductor solutions for both wired and wireless communications, has recently captivated investors with a positive financial forecast showcasing robust growth in its AI sector through 2027.
Following a strong earnings report, the stock has surpassed industry giants like Nvidia, which has dominated the market for an extended period. The post-earnings surge lifted AVGO to an all-time high of $250, and with a remarkable 45% increase over the last month, there remains significant potential for further growth as the company continues to expand its AI initiatives.
Impressive Fourth Quarter
Broadcom’s fourth-quarter earnings for 2024, excluding one-time items, stood at $1.42 per share, up from $1.11 per share in the same quarter the previous year. On a non-adjusted basis, net income increased to $4.32 billion, or $0.90 per share, compared to $3.52 billion, or $0.83 per share, from the previous year.
This increase in profitability was propelled by a 52% rise in Q4 revenues, reaching $14.1 billion, up from $9.3 billion last year. Revenue from Semiconductor Solutions rose by 12% year-over-year, while Infrastructure Software revenue more than doubled. Management has expressed optimism for a double-digit revenue increase in the first quarter of 2025.
The positive investor outlook is indicative of the growing appetite for Broadcom’s advanced AI XPUs and Ethernet networking product line. The company has also introduced next-generation XPUs—built on a three-nanometer process—and aims to commence volume shipments to key hyper-scale customers in the latter half of fiscal 2025.
Leading in AI
Broadcom stands on the brink of significant growth due to the increasing need for its semiconductor solutions among hyperscalers developing their own AI chips, particularly high-performance Ethernet switches and custom AI chips. It is projected that each of Broadcom’s three main hyper-scale clients could deploy one million extreme processing unit clusters by 2027, translating into a serviceable AI revenue market between $60 billion and $90 billion.
In discussing future prospects, Broadcom’s CEO Hock Tan stated during the Q4 2024 earnings call, “We are exceptionally positioned to capture a large share of this market, expecting substantial growth from our 2024 AI revenue base of $12.2 billion. It’s important to note that this growth will not be linear; we anticipate quarterly variability. Additionally, we have been selected by two more hyperscalers and are in advanced stages of development for their next-generation AI XPUs. We expect to convert these opportunities into revenue-generating partnerships before 2027, further expanding our serviceable addressable market.”
The average stock price for Broadcom over the past year is $150.18, with shares increasing by 2% on Tuesday afternoon after opening at $232.35.
