Broadcom’s stock prices soared to record highs after the chipmaker’s revenue surged in the second quarter of fiscal 2024, with a 43% year-over-year increase to $12.5 billion. The company’s AI and software segments led the way, with AI revenue spiking 280% to $3.1 billion and infrastructure software revenue surging 175% to $5.3 billion. However, server storage and broadband revenue saw declines during this period.
In addition, Broadcom announced a 10-for-1 stock split and a $5.25 quarterly dividend, with expectations of full-year revenue reaching approximately $51 billion. The company also forecasts adjusted EBITDA to hit about 61% of revenue, or $31.1 billion, up from a previous estimate of $30 billion.
Despite the strong performance in AI-related segments, Broadcom’s overall business faces challenges, with certain areas struggling due to cyclical weakness and declines in revenue growth. With a forward P/E ratio of over 38, the stock may appear expensive, especially given its significant debt load.
While Broadcom shows promise in the AI space, its current valuation and cyclical nature of certain segments suggest caution when considering an investment. Investors may want to weigh the risks and potential returns before deciding whether to buy Broadcom shares.
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