Intel’s recently retired CEO, Patrick Gelsinger, actually served as the CEO of VMware from September 2012 to February 2021.
He saw VMware grow into a hybrid cloud and enterprise software powerhouse, with revenue more than doubled during his tenure, which caught Broadcom’s attention.
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Broadcom announced the acquisition of VMware in May 2022 and completed it in November 2023. The $61 billion deal was one of the largest in tech history. The acquisition helped Broadcom enhance its cloud infrastructure and virtualization ability, which is needed for AI deployments.
Broadcom provides custom chips for AI applications. Its CEO, Hock Tan, has built a reputation for dealmaking that has transformed the chipmaker into a tech industry heavyweight.
Even Broadcom wasn’t always just "Broadcom." It merged with Avago Technologies in 2016, and the combined company took the Broadcom name. Avago itself was a spin-off from HP's semiconductor division.
"He runs Broadcom like an investment portfolio ... they are all independent fiefdoms," a former Broadcom employee who worked closely with Tan told Reuters. "If he has a dominant position in any market, he'll go in and raise those prices."
Shutterstock-T. Schneider
What to watch in Broadcom’s upcoming earnings
Broadcom (AVGO) shares and many other semiconductor stocks have been quiet since their July peak. Investors are wondering if the stock could erupt after its earnings.
The company will release its fiscal Q4 and full-year 2024 earnings report on Dec. 12 after the market closes.
Related: Analyst resets Broadcom stock price target, citing AI outlook
Wall Street analysts predict Broadcom’s Q4 revenue will hit $14.06 billion, a 51% increase year-over-year. Net income is expected to come in at $3.53 billion, or 76 cents per share, slightly up from $3.52 billion, or 83 cents, in the same period last year.
In September, Broadcom reported fiscal Q3 results that exceeded Wall Street's revenue and earnings estimates.
For the quarter ended Aug. 4, the company earned an adjusted $1.24 a share, surpassing the $1.20 consensus analyst forecast. Revenue came in at $13.07 billion, up 47%, beating expectations of $12.97 billion.
“Broadcom’s third quarter results reflect continued strength in our AI semiconductor solutions and VMware,” Tan said.
Broadcom reported an unadjusted $1.88 billion loss in Q3, partly due to tax charges incurred during its November 2023 acquisition of VMware.
Related: Analysts reboot Broadcom stock price target after earnings, bond sale
Broadcom partners with some of the biggest names in tech. It supplies Apple (AAPL) with wireless chips for iPhones and collaborates with Google (GOOGL) on AI infrastructure.
Tan said AI chip sales were expected to reach $12 billion in fiscal 2024, up from a prior forecast of $11 billion.
Analyst sets higher stock price goal for Broadcom
Analysts now have an overall bullish outlook on Broadcom shares. According to Visible Alpha data pulled by Investopedia, all 12 analysts covering the stock rate it as a buy or equivalent, with a consensus price target of $193. Broadcom closed at $171.81 on Dec.10.
Citi raised Broadcom's price target to $205 from $175 and kept a buy rating ahead of its earnings report, thefly.com reported.
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The firm expects Broadcom to report results above consensus, driven by a recovery in the non-artificial intelligence semiconductor business and a "better-than-feared" gross margin outlook, supported by a higher software contribution.
Citi cautions that Broadcom's Q1 guidance "will be tempered" due to a slowdown in orders from Google, its leading AI customer. However, increased business from Meta in 2025 to "pick up the slack."
Meanwhile, Bank of America recently noted a growing cloud preference for custom chips from Broadcom and Marvell (MRVL) , according to the firm's report on Dec. 9.
Broadcom stock is up roughly 54% year-to-date.
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