Broadcom recently announced a 10-for-1 stock split alongside its earnings release, showing growth in its software and AI product segments. The stock split, effective July 12, will not change the company’s value of around $780 billion. While a stock split may make shares more accessible, it does not alter a company’s fundamentals like earnings or intrinsic value.
Broadcom’s software segment now accounts for over 40% of revenue, driven by its acquisition of VMware for $69 billion. This move has led to significant cost savings and accelerated revenue growth for VMware. The introduction of vSphere has allowed VMware to virtualize all aspects of data centers, contributing to its impressive growth.
CEO Hock Tan expects VMware’s revenue to reach $4 billion quarterly, with operating expenses decreasing to $1.2 billion. If Broadcom can maintain VMware’s gross margins, operating profit could improve significantly. Additionally, Broadcom’s AI products, including networking products and custom ASICs, have experienced strong growth, with networking products accounting for 53% of semiconductor revenue.
Despite challenges in other segments like mobile chips and storage connectivity, Broadcom anticipates growth in the second half of the year. With VMware’s profitability increasing, AI revenues surging, and non-AI segments expected to rebound, Broadcom’s profits are likely to rise in the future.
Overall, Broadcom remains a key player in the technology industry, with strong growth in its software and AI divisions. The company’s stock split and earnings report indicate a positive outlook for its future performance.
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https://www.fool.com/investing/2024/06/17/broadcoms-stock-split-isnt-reason-to-buy-the-stock/