Semiconductor manufacturer Broadcom, Inc. has been focusing on the growth of its AI chip business, which is expected to make up about 20% of its revenue this year, with VMware contributing significantly as well. The company’s stock hit an all-time high in May after trending upward since the start of the year. Despite being one of the pricier stocks on Wall Street, the current valuation is considered attractive to investors, especially for long-term investment due to its quarterly dividend yielding 1.8%.
Broadcom is set to report its fourth-quarter results on June 12, with adjusted earnings expected to increase from $10.32 per share to $10.8 per share, and revenue anticipated to reach $12.03 billion, up from $8.73 billion last year. The acquisition of VMware has significantly boosted Broadcom’s infrastructure software division, with expectations of double-digit revenue growth for VMware throughout the fiscal year.
Broadcom’s CEO mentioned on a conference call that VMware‘s revenue is set to grow steadily due to the company’s strategy in upselling to customers already using their vSphere virtualization tools. Broadcom’s semiconductor products are in high demand, particularly in AI data centers and accelerators for hyperscale customers, driving continued growth in this segment. However, competition from Nvidia in developing custom chips for cloud computing poses a potential challenge for Broadcom, as do weaker performances in its other business units.
In the first quarter, Broadcom saw increased revenue and adjusted earnings, surpassing analysts’ forecasts. Unadjusted earnings decreased, but the overall performance exceeded expectations. The company’s management anticipates revenue to reach around $50 billion for fiscal 2024.
Broadcom’s stock has been trading above its 52-week average for the past five months, opening the current session at just over $1,320. With a positive outlook for the AI chip business and VMware‘s contribution to revenue growth, investors are closely watching Broadcom’s upcoming earnings report to gain insights into the company’s continued success.
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