Broadcom on Thursday night reported strong quarterly results and offered upbeat comments on the expected growth of its key artificial intelligence business. While profit-takers are pushing the stock down in extended trading, there is little cause for concern. Revenue in Broadcom’s fiscal 2025 second quarter increased 20% year over year to $15 billion, slightly ahead of the consensus forecast of $14.99 billion, according to estimates compiled by LSEG. Adjusted earnings per share increased 44% from the year-ago period to $1.58, also outpacing expectations of $1.56, LSEG data showed. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 35% year over year to $10 billion in the quarter, beating the FactSet consensus estimate of $9.94 billion. Shares of Broadcom slumped more than 4% in after-hours trading Thursday, to below $249 apiece. This reaction is not much of a surprise, though, given Broadcom’s reported results and current quarter guidance were only narrowly ahead of expectations and the stock has been flying since early April. Ultimately, the business is in good shape, and we expect shares to resume their upward trajectory into year-end. AVGO YTD mountain Broadcom’s year-to-date stock performance. Bottom line Broadcom continues to fire on cylinders with second-quarter sales, profit margins and earnings all coming in ahead of estimates Thursday night. Expectations were lofty coming into the print, with Broadcom’s stock ending Thursday’s session about $1 a share below the all-time closing high set Wednesday. Sure, the results weren’t enough of a blowout to send shares higher in extended trading Thursday. However, they were strong enough to validate the stock’s nearly 78% rally off its tariff-driven closing low on April 4. Short-term market reaction aside, there should further should be upside ahead for Broadcom shares. The key reason why: There are no signs that demand for the company’s custom AI chips, or “accelerators,” and networking solutions is letting up anytime soon, with CEO Hock Tan calling for robust growth to continue into the company’s next fiscal year. Specifically, Tan said Broadcom expects its fiscal 2025 growth rate for AI revenue to “sustain into fiscal 2026.” Broadcom is the longtime co-developer of Alphabet’s Tensor Processing Unit, and more recently is believed to have added Club name Meta Platforms and TikTok owner ByteDance as customers (it doesn’t name them directly). On the software side, Broadcom continues to make the most of its blockbuster VMware acquisition as the company works to move more customers to subscription-based accounts. 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 allocation strategy with its dividends and buybacks. Competitors : Marvell Technology, Advanced Micro Devices…
Read More: We’re lifting our price target on Broadcom after its AI business impresses