AVGO Stock: Broadcom Delivers Beat-And-Raise Quarterly Report

Chipmaker and supplier of infrastructure software Broadcom ( AVGO ) beat Wall Street’s targets for the fiscal second quarter and with the outlook for the current period. AVGO shares rose on Friday.

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The San Jose, Calif.-based company said late Thursday that it earned an adjusted $10.32 a share on sales of $8.73 billion for the quarter ended April 30. Analysts polled by FactSet expected earnings of $10.12 per share on sales of $8.7 billion. On a year-over-year basis, Broadcom revenue rose 14% while sales rose 8%.

For the current quarter ending July 30, Broadcom forecast sales of $8.85 billion, up 5%. Analysts had called for $8.72 billion in the third quarter.

“Our third-quarter outlook projects year-over-year growth, reflecting continued leadership in networking as we support a measured ramp into large-scale AI networks,” CEO Hock Tan said in a press release.

The AVGO share rises after the report

In afternoon trading on the stock market today, AVGO shares climbed 2.9% to 812.48. During the regular session Thursday, Broadcom retreated 2.2% to 789.95.

Demand for next-generation technologies from hyperscale data center operators drove Broadcom’s better-than-expected second-quarter results, Tan said.

Semiconductor products accounted for 78% of Broadcom’s revenue in the second quarter. Meanwhile, infrastructure software contributed 22% of sales.

Chip sales rose 9% to $6.81 billion, while infrastructure software sales rose 3% to $1.93 billion.

Broadcom gets AI boost

In a conference call with analysts, Broadcom executives said they expect the opportunity from generative artificial intelligence to grow to about 25% of semiconductor revenue in fiscal 2024 from about 10% in fiscal 2022.

“We see Broadcom as among the biggest potential winners from an AI infrastructure boom, driven by its networking/switching business and ASIC (application specific integrated circuit) solutions,” CFRA Research analyst Angelo Zino said in a note to clients.

AI revenue could reach about 18% to 20% of the company’s total sales in fiscal 2024, Zino said. The pending acquisition of is excluded VMware (VMW).

Zino maintained the buy rating on AVGO shares, but raised the price target to 850 from 750.

KeyBanc Capital Markets analyst John Vinh maintained his overweight rating on AVGO shares and raised his price target to 940 from 820. In a note to clients, he said AI has emerged as another growth driver for the company.

Broadcom is positioned as the second largest supplier of AI computing and network chips behind Nvidia (NVDA), JPMorgan analyst Harlan Sur said in a note to clients.

The AVGO share is on 3 IBD lists

Broadcom stock ranks first in IBD’s fabulous semiconductor industry group, according to IBD Stock Checkup. The AVGO share has the best possible IBD Composite Rating of 99.

Furthermore, the AVGO share is on three IBD share lists: IBD 50, Big Cap 20 and Tech Leaders.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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