What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ:AVGO) jumped 21.3% in the morning session after the company posted strong third-quarter (FQ4 2024) results, with revenue and EPS surpassing Wall Street's expectations. Revenue rose 51% compared to the prior year, fueled by strong contributions from VMWare. Given the strong top-line growth, operating margins climbed to 63%, though semiconductor gross margins softened slightly due to a higher mix of AI-driven products. AI emerged as a centerpiece of Broadcom's strategy, generating $3.7 billion in revenue during the quarter—a 150% increase year-on-year—and representing a substantial portion of semiconductor sales. This highlights the company's growing dependence on AI technologies as a driver of future growth.
Looking ahead, Broadcom's guidance for Q1 2025 implied a 22% year-on-year revenue growth, driven by continued strength in AI semiconductor demand. This is expected to drive a 66% adjusted EBITDA margin. Overall, this was a strong quarter for Broadcom, demonstrating its AI prowess.
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What The Market Is Telling Us
Broadcom’s shares are very volatile and have had 22 moves greater than 5% over the last year. But moves this big are rare even for Broadcom and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 5.5% on the news that reports revealed that the company is collaborating with Apple, the maker of the iPhone, to create its first server chip specifically designed for artificial intelligence tasks. The news highlights the growing trend of tech giants shifting to in-house chip manufacturing. It also showcases Broadcom's expertise in AI chip design, potentially drawing more attention to the company alongside rivals like Nvidia and AMD.
Broadcom is up 100% since the beginning of the year, and at $217.48 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 $6,895.
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