Broadcom Inc. AVGO is riding high on the wave of strong momentum in its AI semiconductor segment and VMware business.

The company reported an earnings and revenue beat for the third quarter on Thursday. Earnings per share of $1.24 beat estimates by 3.33%. Reported revenue at $13.07 billion delivered a 0.86% surprise on estimates. Despite the earnings beat, Broadcom shares have been trading lower since the report came out. The stock dipped as much as 9.4% in premarket trading on Friday.

With a bullish outlook, JPMorgan analyst Harlan Sur has raised Broadcom stock’s price target to $210 by December 2025, reflecting confidence in the company’s continued growth trajectory.

Broadcom’s AI Revenue Explosion, Strong Guidance

Broadcom's AI semiconductor segment continues to deliver impressive numbers, posting 3%-4% quarter-over-quarter growth in the July quarter. There’s also potential to accelerate by 10% in the October quarter. Sur now projects AI revenues for FY24 to top $12 billion, a significant increase from the previous estimate of $11 billion.

According to JPMorgan's analysis, Broadcom's AI business, which includes custom ASICs and networking solutions, is expected to see a compound annual growth rate of 30%-40% over the next four to five years.

This AI-driven surge is coupled with strength in Broadcom's non-AI semiconductor business, which is projected to grow 10% Q/Q in the upcoming quarter.

Additionally, demand from major clients like Google’s parent Alphabet Inc GOOG GOOGL and Meta Platforms Inc META for AI networking products and 3nm AI ASICs, positions Broadcom for further growth in FY25.

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VMware Boost, Cyclical Recovery

VMware's acquisition continues to pay off handsomely for Broadcom, with a 25%+ Q/Q growth forecast in the upcoming quarter. VMware's contribution to infrastructure software revenue surged 41% in the third quarter, helping Broadcom's total revenue climb to $13.07 billion, beating consensus estimates of $12.7 billion.

Sur highlighted VMware's strong software renewal rates and upsell opportunities, with revenue potentially reaching $4.5-$5 billion per quarter by 2025.

The cyclical recovery in traditional networking and server storage further adds to the bullish case. Broadcom is seeing a 20% year-over-year increase in non-AI semiconductor bookings, suggesting a sustained recovery in the next six to 12 months.

Broadcom's Future Looks Bright

Investors are likely to see continued upside, with Sur projecting a 30x price-to-earnings multiple applied to an estimated $7.00 dollars per share for FY25.

With strong AI growth, robust VMware momentum, and a solid recovery in traditional semiconductor sectors, Broadcom is well-positioned to capitalize on its diversified portfolio. The stock remains a “top pick in semiconductors” for JPMorgan.

AVGO Price Action: Broadcom stock was trading down 9.02% at $139.03 Friday at publication.

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