Zinger Key Points
- Broadcom reported third-quarter revenue of $13.072 billion and earnings per share of $1.24.
- he company projects AI-related revenues to reach $12 billion in 2024, while VMware's contribution to infrastructure software revenue surged.
Shares of Broadcom Inc. AVGO are trading lower Friday, despite the company reporting robust third-quarter earnings that exceeded market expectations. Here’s what you need to know.
Earnings Recap: The company reported revenue of $13.072 billion, beat analyst estimates of $12.96 billion. This marks a significant 42% increase compared to last year.
Earnings per share (EPS) also beat expectations, coming in at $1.24 against the forecasted $1.20. The strong performance was driven by robust demand for Broadcom’s AI semiconductor solutions.
AI and VMware: The Twin Engines of Growth
Broadcom's AI business continues to gain momentum, with quarter-over-quarter growth of 3%-4% in the July quarter. The AI-driven surge is complemented by strength in Broadcom’s non-AI semiconductor segment, expected to grow 10% in the upcoming quarter. VMware, acquired by Broadcom, has also significantly contributed, with infrastructure software revenue surging 41% in the third quarter.
JPMorgan analyst Harlan Sur remains bullish, raising the stock's price target to $210 by December 2025, based on Broadcom's diversified growth drivers. However, despite these positive developments, some analysts noted that Broadcom's guidance could have been more aggressive, reflecting a cautious approach amid uncertain market conditions.
Major firms, including Benchmark, Goldman Sachs, Morgan Stanley and Cantor Fitzgerald, have reiterated their Buy or Overweight ratings.
Market Reaction: A Selloff
The selloff comes as a surprise, especially given the company's strong financial performance and promising outlook. The stock had dipped as much as 9.4% in premarket trading following the earnings release.
Looking Ahead: What's Next for Broadcom?
Broadcom's management has set its sights on a strong finish to the year, with fourth-quarter revenue expected to reach approximately $14 billion. The company also anticipates adjusted EBITDA to be around 64% of the projected revenue, indicating continued profitability.
AVGO Price Action: Broadcom shares were down by 9.7% at $138.00 according to Benzinga Pro.
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