Broadcom (NASDAQ:AVGO) shares surged more than 6% in U.S. premarket trading on Thursday after the artificial intelligence chipmaker reported quarterly results that beat expectations on both revenue and profit, while issuing stronger-than-anticipated guidance for the current quarter.
The company also unveiled a new share repurchase authorization of up to $10 billion.
For its fiscal first quarter, Broadcom reported adjusted earnings of $2.05 per share on revenue of $19.31 billion. Analysts had forecast earnings of $2.02 per share and revenue of $19.21 billion.
Looking ahead, the chipmaker said it expects second-quarter revenue of roughly $22 billion, comfortably above the consensus estimate of $20.4 billion. AI semiconductor revenue is projected to reach $10.7 billion.
“Broadcom achieved record first quarter revenue on continued strength in AI semiconductor solutions. Q1 AI revenue of $8.4 billion grew 106% year-over-year, above our forecast, driven by robust demand for custom AI accelerators and AI networking,” CEO Hock Tan said in a statement.
Headquartered in Palo Alto, California, Broadcom is a major supplier of semiconductor components and infrastructure software solutions. The company develops artificial intelligence chips alongside a wide range of semiconductor products used in networking, wireless devices, servers, storage systems and broadband technologies. Its infrastructure software portfolio also serves markets including private cloud computing, cybersecurity and enterprise software.
Broadcom competes with major chip designers such as Nvidia (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM). In recent years, the company has become an increasingly credible alternative to Nvidia for hyperscale cloud operators such as Alphabet and Meta Platforms, which are adopting custom application-specific integrated circuits (ASICs) for their data centers.
“The last four quarters for AVGO have seen ASICs move from a second source to a real competitive option for major customers – especially Google who has begun to sell externally as well,” Jefferies analyst Blayne Curtis said in an earnings preview note last week.
Broadcom’s results arrive at a time when enthusiasm around the AI trade has recently cooled. Over the past several weeks, investor sentiment has shifted from the idea that AI would broadly lift the technology sector to a view that the technology will produce clear winners and losers. Industries such as software, enterprise services and even food delivery have been flagged as areas potentially facing major disruption from AI.
AI heavyweight Nvidia last week also reported strong quarterly results and issued revenue guidance that topped expectations. Nevertheless, the report failed to fully calm investor concerns about the returns on AI investments and the scale of spending required to support the technology.
“Broadcom and Nvidia have been unable to shake the overarching capex/macro fears, with NVDA down on a borderline perfect print,” Jefferies’ Curtis had noted.
“We still fundamentally believe both Broadcom and Nvidia are poised for breakouts as valuations are too depressed. NVDA earnings suggest the print will not be that catalyst, but we continue to view AVGO and NVDA as the most certain AI winners in our space trading at basement bargain multiples,” he had added.