Broadcom exceeds earnings expectations amid booming AI chip demand

Broadcom Inc. capped off fiscal year 2024 with stellar fourth-quarter financial results, driven by its exceptional performance in artificial intelligence (AI) and semiconductor segments. The company achieved an impressive 51% increase in quarterly revenue year-over-year, driven primarily by AI revenue growth and the successful integration of VMware into its infrastructure software portfolio. The demand for Broadcom’s custom AI chips, designed for cloud computing, was a key factor behind this remarkable performance.

CEO Hock Tan attributed much of Broadcom’s success to the company’s ongoing investments in AI technology, noting that its AI-related revenue tripled to $12.2 billion for the year. This growth stems from Broadcom’s partnerships with three major cloud providers, which have relied on its innovative custom AI chips to meet the increasing demand for AI-driven solutions.

Financial Highlights of a Record Quarter

For the fourth quarter ending November 3, 2024, Broadcom reported revenue of $14.05 billion, narrowly missing Wall Street estimates of $14.09 billion. However, the company exceeded expectations in earnings per share (EPS), delivering $1.42 adjusted EPS compared to the $1.38 forecast. Notably, semiconductor revenue growth remained robust, supported by record sales in AI processors and Ethernet networking products.

Infrastructure software revenue also soared, climbing 196% year-over-year to $5.8 billion. This diversification reinforces Broadcom’s ability to achieve sustainable AI revenue growth while solidifying its leadership in the tech sector. CFO Kirsten Spears highlighted the company’s operational efficiency, citing free cash flow of $5.5 billion for the quarter, which enabled Broadcom to increase its quarterly dividend by 11% to $0.59 per share.

Custom AI Chips and the AI Boom

Broadcom’s custom AI chips have emerged as a cornerstone of the company’s strategy, enabling it to cater to the complex demands of hyperscale cloud providers. These chips are designed to handle the heavy computational loads required for advanced AI applications, making Broadcom a key player in the global AI and semiconductor markets.

Hock Tan noted that Broadcom’s leadership in the AI space is supported by its high-performance XPU processors and Ethernet networking solutions. These technologies not only drive semiconductor revenue growth but also ensure the scalability and reliability required by AI workloads.

Fiscal Year 2024 and 2025 Outlook

For fiscal year 2024, Broadcom reported total revenue of $51.6 billion, a 44% year-over-year increase. Semiconductor revenue growth reached $30.1 billion, while infrastructure software revenue surged to $21.5 billion. Adjusted EBITDA also grew significantly, rising 37% to a record $31.9 billion.

Looking ahead to fiscal year 2025, Broadcom expects first-quarter revenue to hit $14.6 billion, slightly above analysts’ projections, with an adjusted EBITDA margin of 66%. This guidance reflects confidence in the sustained demand for custom AI chips and continued AI revenue growth, particularly in the cloud computing sector.

Investor Confidence and Future Prospects

Broadcom’s ability to exceed EPS expectations and maintain strong cash flow underscores its commitment to delivering long-term value to shareholders. With a projected annual dividend of $2.36 per share for fiscal 2025, Broadcom has marked its 14th consecutive year of dividend increases.

Shares of Broadcom soared 13% in after-hours trading following the earnings announcement, signaling investor confidence in the company’s strategic direction. Analysts view Broadcom’s strong position in the AI and semiconductor markets as a key driver of sustained semiconductor revenue growth.

As the global demand for AI solutions continues to accelerate, Broadcom’s innovative custom AI chips and robust product pipeline will likely secure its dominance in the sector for years to come.