Chipmaker and infrastructure software provider Broadcom beat Wall Street's targets for its fiscal second quarter and with its outlook for the current period. AVGO stock rose on Friday.
The San Jose, Calif.-based company late Thursday said it earned an adjusted $10.32 a share on sales of $8.73 billion for the quarter ended April 30. Analysts polled by FactSet expected earnings of $10.12 a share on sales of $8.7 billion. On a year-over-year basis, Broadcom earnings rose 14% while sales increased 8%.
For the current quarter ending July 30, Broadcom forecast sales of $8.85 billion, up 5%. Analysts had called for $8.72 billion in the fiscal third quarter.
"Our third-quarter outlook projects year-over-year growth, reflecting continued leadership in networking as we support a measured ramp into large-scale AI networks," Chief Executive Hock Tan said in a news release.
AVGO Stock Rises After Report
On the stock market today, AVGO stock climbed 2.8% to close at 812. During the regular session Thursday, Broadcom retreated 2.2% to close at 789.95.
Demand for next-generation technologies by hyperscale data center operators drove Broadcom's better-than-expected results in the second quarter, Tan said.
Semiconductor products accounted for 78% of Broadcom's revenue in the second quarter. Meanwhile, infrastructure software contributed 22% of sales.
Chip sales rose 9% to $6.81 billion while infrastructure software sales increased 3% to $1.93 billion.
Broadcom Gets AI Boost
On a conference call with analysts, Broadcom executives said they expect the opportunity from generative artificial intelligence to increase to about 25% of its semiconductor revenue in fiscal 2024 vs. about 10% in fiscal 2022.
"We view Broadcom as among the biggest potential winners from an AI infrastructure boom, driven by its networking/switcher business and ASIC (application-specific integrated circuit) solutions," CFRA Research analyst Angelo Zino said in a note to clients.
AI revenue could reach about 18% to 20% of total company sales in fiscal 2024, Zino said. That's excluding its pending acquisition of VMware.
Zino maintained his buy rating on AVGO stock but raised his price target to 850 from 750.
KeyBanc Capital Markets analyst John Vinh kept his overweight rating on AVGO stock and upped his price target to 940 from 820. In a note to clients, he said AI has emerged as another growth driver for the company.
Broadcom is positioned as the second largest supplier of AI compute and networking chips behind Nvidia, JPMorgan analyst Harlan Sur said in a note to clients.
AVGO Stock Is On 3 IBD Lists
Broadcom stock is tied for first place in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. AVGO stock has a best-possible IBD Composite Rating of 99.
Further, AVGO stock is on three IBD stock lists: IBD 50, Big Cap 20 and Tech Leaders.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
