Broadcom Stocks Surge on Promising AI Revenue Growth AVGO shares experienced an impressive jump of 14.4% in premarket trading on Friday. This surge followed an earnings call where management revealed a remarkable four-fold increase in AI connectivity revenue, attributed to the successful shipments of their Tomahawk and Jericho products.

Key Developments in AI Connectivity: The company has doubled the shipments of its AI XPU units to hyperscale customers, indicating a rising demand for advanced hardware required for AI applications.

“In Q1, we expect our AI connectivity momentum to continue growing as more hyperscalers integrate Jericho3AI into their networks. Our next-generation XPUs, manufactured using a three-nanometer process, will be the first of this kind on the market,” stated Hock E. Tan, the president, CEO, and director of Broadcom.

Additionally, Broadcom noted an increasing trend among customers to adopt private cloud environments on-premises through VMware Cloud Foundation (VCF). This change contributed to a significant drop in VMware spending, which decreased to $1.2 billion in the fourth quarter from $1.3 billion in the third quarter.

Tan remarked, “We have reduced spending to $1.2 billion in Q4, down from $1.3 billion in Q3. For comparison, VMware spending averaged over $2.4 billion per quarter before the acquisition, with operating margins below 30%.”

The earnings call also revealed an expectation that VMware’s Annualized Billing Value (ABV) will exceed $3 billion in the upcoming first quarter, a rise from $2.7 billion in the previous quarter.

Financial Performance Overview: In its latest quarterly report, Broadcom posted earnings of $1.42 per share, exceeding the analyst consensus estimate of $1.38. However, the quarterly revenue reached $14.05 billion, just shy of the consensus estimate of $14.09 billion, yet significantly higher than the $9.295 billion reported during the same period last year.

“Broadcom’s fiscal year 2024 revenue grew by 44% year-over-year, achieving a record $51.6 billion. This growth was driven by infrastructure software revenue, which climbed to $21.5 billion following our successful integration of VMware,” noted Hock Tan.

“Our semiconductor revenue also reached a record $30.1 billion, fueled by AI revenue of $12.2 billion, which saw a year-on-year growth of 220% due to our leading position in AI XPUs and Ethernet networking offerings,” he added.

Overall, the rapidly changing AI landscape, characterized by substantial investments and technological advancements in hardware and networking infrastructure, is expected to influence upcoming financial quarters.

Price Trends and Analyst Predictions: Year-to-date, Broadcom stock has risen over 66%, significantly outpacing the Nasdaq 100 index, which increased by 30.65% during the same timeframe.

According to Benzinga Pro data, the average price target stands at $215 based on the latest three ratings from Rosenblatt, Citigroup, and UBS, indicating a potential upside of 19% for Broadcom’s shares compared to Thursday’s closing price.

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