Broadcom’s shares closed up more than 24% on Friday, marking the company’s best trading day on record and pushing its market capitalization beyond $1 trillion for the first time. This surge followed the release of the company’s fourth-quarter results, which exceeded Wall Street’s expectations and highlighted significant growth in artificial intelligence (AI) revenue.
Financial Highlights
- Revenue: Broadcom reported $14.05 billion in revenue for Q4, a 51% increase year-over-year, though slightly below the $14.09 billion expected by analysts from LSEG.
- Semiconductor Solutions Group: Revenue in this segment, which includes AI chips, rose 12% to $8.23 billion from $8.03 billion a year ago.
- AI Revenue Growth: The company’s AI revenue skyrocketed by 220% for the year, totaling $12.2 billion.
- Net Income: Broadcom’s net income reached $4.32 billion, or 90 cents per share, up 23% from $3.52 billion, or 83 cents per share, in the same quarter the previous year.
CEO Hock Tan’s announcement about developing custom AI chips for major cloud customers further fueled optimism, leading to a stock surge in after-hours trading.
Analyst Reactions
Bernstein
Analysts at Bernstein expressed encouragement regarding Broadcom’s fourth-quarter earnings, raising their price target on the stock from $195 to $250. They noted that the AI narrative is gaining traction and highlighted Tan’s management vision as a positive factor.
Bank of America
Bank of America analysts reiterated their buy rating, citing Broadcom’s “surging AI opportunity.” They acknowledged the company’s dominance in the market for custom chips but warned of potential risks from competition, especially from Nvidia’s stronghold in merchant silicon.
Morgan Stanley
Morgan Stanley analysts emphasized that Broadcom’s commentary on AI is likely to enhance long-term enthusiasm for the company. They believe that Broadcom represents one of the most compelling plays in AI semiconductors over the next two to three years.
Conclusion
Broadcom’s impressive earnings and positive outlook for AI development position the company favorably in the rapidly developing tech landscape. The strong market response reflects investor confidence in Broadcom’s strategic direction and its ability to capitalize on the burgeoning AI market. As the company continues to innovate and expand its product offerings, it remains a key player in the semiconductor industry.
