Broadcom shares rose about 12% on Thursday after the company posted second fiscal quarter earnings that beat analysts’ estimates and showed that it’s benefiting from the artificial intelligence boom.
Broadcom reported earnings per share of $10.96 ahead of LSEG consensus estimates of $10.84 per share. The company reported revenue of $12.49 billion, beating the expected $12.03 billion.
The chipmaker said it expects about $51 billion in sales during its fiscal 2024 year, an increase from the company’s previous forecast and slightly higher than consensus expectations of $50.42 billion.
Analysts see Broadcom as a beneficiary of increasing investments in AI.
“Alongside Nvidia, we view Broadcom as a critical piece to the ongoing AI infrastructure build-out, and reiterate our Buy rating on the stock with 8% potential upside (vs. AVGO’s after-hour price of $1,713) to our updated 12-month price target of $1,850 (from $1,550 prior),” Goldman Sachs analysts said in a note to investors on Thursday.
Bank of America analysts reiterated a buy rating and said they consider Broadcom a top AI pick because it is positioned to grow in custom AI chips and Ethernet networking. They also said Broadcom can upsell VMware to enterprise customers deploying AI.
“We model FY24E sales at $51.5bn, above guidance on continued upside to AI, with FY25/FY26E sales growth raised to 16%/10% YoY from 14%/8% prior,” the Bank of America analysts said.
Broadcom also announced a 10-for-1 stock split on Wednesday. Shares are set to begin trading on a split-adjusted basis on July 15.
— CNBC’s Michael Bloom contributed to this report.
