What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ: AVGO) jumped 9.2% in the afternoon session after the company reported solid second-quarter financial results, added a new AI customer, and provided an optimistic revenue forecast for the upcoming quarter, signaling healthy business momentum.
The company posted second-quarter revenue of $15.95 billion, a 22% increase year-over-year that was in line with Wall Street expectations, while its adjusted earnings of $1.69 per share narrowly beat analyst estimates. Broadcom also fueled investor optimism by guiding for third-quarter revenue of around $17.4 billion, surpassing consensus forecasts.
Beyond the headline numbers, the report highlighted strong operational performance, including a significant improvement in inventory management and a rise in operating margin to 36.9% from 29% in the same quarter last year.
Notably, the company added during the earnings call that it secured "a $10B order from a fourth XPU customer (we believe this is OpenAI)."
This combination of a solid earnings report, strong forward guidance, and improved profitability metrics bolstered investor confidence in the company's outlook.
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What Is The Market Telling Us
Broadcom’s shares are very volatile and have had 25 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 4.2% on the news that stocks in the semiconductor sector pulled back, driven by underwhelming news from key industry peers.
The decline was linked to investor reaction to AI-chip leader Nvidia's recent earnings report, which, despite a positive forecast, failed to exceed Wall Street's lofty expectations, causing its shares to fall. This created a ripple effect across the industry, impacting other chipmakers.
Adding to the pressure, a weak forecast from fellow chipmaker Marvell further soured sentiment on the entire semiconductor sector. The negative news from these major players prompted investors to reassess the near-term growth prospects for chip companies, leading to widespread losses among the group.
Broadcom is up 46% since the beginning of the year, and at $338.80 per share, has set a new 52-week high. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $9,664.
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