On Thursday night, Broadcom reported strong quarter results and provided cheerful comments on the expected growth of major artificial intelligence businesses. For-profit scholars are pushing stocks down in extended transactions, but there is little cause for concern. Broadcom's second quarter revenue for fiscal year 2025 rose 20% year-on-year to $15 billion, slightly surpassing its consensus forecast of $15.9 billion, according to estimates compiled by LSEG. Earnings per share increased 44% from the same period last year, with an forecast of $1.56 rising to $1.58, according to LSEG data. Adjusted revenue before interest, tax, depreciation and amortization (EBITDA) increased 35% year-on-year to $10 billion, breaking Factset Consensus estimates by $9.94 billion. Broadcom shares fell below $249 each, more than 4% in after-hours trading on Thursday. This response isn't too surprising, however, given the reported results from Broadcom and current quarter guidance are slightly ahead of expectations, with stocks flying since early April. Ultimately, the business is in good condition and we hope that stocks will resume their upward trajectory at the end of the year. AVGO YTD Mountain Broadcom's stock performance from the beginning of the year. Bottomline Broadcom continues firing on cylinders with second quarter sales, profit margins and revenue ahead of forecasts on Thursday night. Broadcom shares ended in session on Thursday, bringing expectations to a close at Wednesday's all-time high set at around one share per share. Certainly, the results were not enough to send higher stocks in Thursday's extension trading. However, they were strong enough to verify the rallies near 78% on April 4th, when the stock price was tax-driven decline in closures. Short-term market reaction aside, there should be more to Broadcom's stock. The reason is that the company's demand for custom AI chips, or “accelerators,” and the demand for networking solutions is quickly disappearing, and CEO Hooktan is hoping for robust growth to continue into the company's next fiscal year. Specifically, Tan said Broadcom is hoping for a 2025 growth rate, so that AI revenues will be “maintained in fiscal year 2026.” Broadcom is a longtime co-developer of Alphabet's tensor processing unit, and is believed to have recently been added as a client by the club name meta platform and Tiktok owner (not directly named). On the software side, Broadcom continues to make the most of its Blockbuster VMware acquisition as it works to move more customers to subscription-based accounts. Why We Own IT Broadcom is a quality semiconductor and software company run by Hock Tan's incredible CEO. The company is a large AI beneficiary through its networking and custom chip business. There is also a shareholder-friendly capital allocation strategy with dividends and buybacks. Competitors: Marvell Technology, Advanced Micro Devices, Nvidia Last Buy: Starting November 21, 2024: On August 24, 2023, Broadcom bought back approximately 25 million shares in the three months ended May 4, exceeding $4.2 billion to shareholders. Another $2.8 billion was returned through dividends. Based on everything I saw and heard on Thursday night, I'm raising my stock price target from $230 to $290 per share. Nevertheless, we are still holding 2 on par with our hold, given the incredible run we saw since early April, just two days after President Donald Trump's “mutual” tariff announcement. Before considering an upgrade, you're looking for stocks that will consolidate or offer a more attractive entry point to make it as bright as Broadcom's future look. Broadcom's second quarter semiconductor solutions revenue rose to $8.41 billion, up nearly 17% from the previous year, according to Factset. The results show the acceleration seen in the first quarter, with an increase of 11% year-on-year. The segment's total margin increased to 69%, an expansion of 140 base points from the previous year. In particular, AI semiconductor revenues were $4.4 billion, an increase of 46% from the previous year. Driven that powerful outcome was the revenue of custom AI accelerators, which increased by double digits compared to the previous year. As a reminder, there are two parts of Broadcom's AI business. Custom AI accelerators and networking chips are part of the “piping” of the data center and help the various components communicate as a larger computing factory. In particular, AI networking revenues have more than doubled compared to the previous year's period, surged by more than 170% compared to the previous year, accounting for 40% of AI's total revenues. Asked about networking's strengths, Tan said over the phone that in the long run, networking should be less than 30% of AI's revenue. In the call, Tan called out three existing custom chip customers from Broadcom (alphabet, meta and bidance as mentioned above) and reaffirmed that there are currently four “prospects” in view of their partnership with Broadcom, a custom AI solution. Tan was asked if Broadcom's rosy forecast for AI revenue growth in 2026 includes contributions from prospects. “There are no comments. Don't talk about prospects. We only talk about customers,” he said. The widely respected CEO shows how the evolving macro landscape around tariffs and the economy is affecting the pace of clients in AI infrastructure investment. “These partners are still unwavering with their plans to invest despite these specific economic circumstances,” he said. “In fact, what we've seen recently is that they're doubling their reasoning to monetize their platform, and reflecting this, we might actually see acceleration. [custom chip] Demand for the second half of 2026 to meet the demand for urgent reasoning. “This is a noteworthy comment as there are two comprehensive categories of AI computing. The first comment is the training that is fed to the model to use a large amount of data. While it requires AI's computing capabilities, sales are down, along with seasonal trends, as well as wireless revenue. And Tan said, Tan. Infrastructure software revenues rose by about 25% year-on-year to $6.6 billion, according to FactSet. Permanent licensed users to calculate VMware Cloud Foundation (VCF) subscriptions allow customers to create their own private clouds In the third quarter of 2025, total revenues will be around $15.8 billion, with a target of over $15.75 billion, according to FactSet, Factsed's forecasts also have an infrastructure segment of $66.8 billion, with a forecast of about $9.1 billion, ahead of the consensus forecast of about $9.8 billion. Jim Cramer's charitable trusts are long meta, AAPL, AVGO, NVDA ahead of the $10.3 billion consensus estimate. His Charitable Trust Portfolio Inventory talks about CNBC TV stock before running the investment club information above.
