Broadcom shares were rewarded Thursday evening after the chipmaker delivered the kind of quarterly beats and strong guidance needed to ease investor fears about a potential slowdown in artificial intelligence semiconductor spending. Revenue in Broadcom’s fiscal 2025 first quarter increased 25% year over year to $14.92 billion, beating the consensus forecast of $14.61 billion, according to estimates compiled by LSEG. Adjusted earnings per share increased 45% from the year-ago period to $1.60, which exceeded the $1.49 expected, LSEG data showed. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 41% year over year to $10.08 billion in the quarter, beating the FactSet consensus estimate of $9.66 billion. AVGO 1Y mountain Broadcom 1 year Broadcom shares rose more than 12% in after-hours trading — erasing Thursday’s losses, and then some, and putting the Club name back above $200. The stock has been struggling over the past five weeks since Chinese startup DeepSeek’s efficient AI model came on the scene. Broadcom shares closed at a record high of $250 each on Dec. 16. Bottom line After a disappointing reaction to a solid quarter from Marvell Technology , whose stock closed down nearly 20% on Thursday, investors were bracing for a disappointment from Broadcom after the closing bell. What we got instead was a great quarter top to bottom, driven by better-than-expected AI-related and infrastructure software revenue, which also helped lift margins above guidance. The key section of the post-earnings conference call that sent the shares even higher was when Broadcom CEO Hock Tan revealed the company is engaged with two more hyperscaler clients to develop custom accelerators, also known as XPUs, to train their next-generation AI models. These potential customers are on top of the two that Tan said the company was engaged with on multiyear ramps across various technologies. All of this is in addition to the company’s three current customers that buying chips in volume. Those clients are widely believed to be Club names Alphabet and Meta Platforms — and more recently, TikTok parent ByteDance. The news of two new customer engagements should help ease some of the fears around AI spending. But it’s also a win for the kind of custom silicon that Broadcom makes versus the configurable but off-the-shelf graphics processing units, or GPUs, from our other portfolio chipmaker Nvidia . Importantly, the four potential Broadcom customers are not included in the company’s estimated serviceable addressable market, or SAM, for AI of about $60 billion to $90 billion by fiscal 2027. Broadcom originally shared this SAM on its last earnings call, and it’s looking more likely to be conservative. Why we own it Broadcom is a high-quality semiconductor and software company run by an incredible CEO in Hock Tan. The company is a big AI beneficiary through its networking and custom chip businesses. It also has a shareholder-friendly capital…
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