Broadcom (AVGO, Financial) is experiencing a significant surge, reaching a new all-time high after announcing its Q4 results and guidance. The semiconductor leader reported a modest EPS increase, with revenue climbing 51.2% year-over-year to $14.05 billion, or 11% when excluding its VMWare acquisition. The company also projected Q1 revenues of approximately $14.6 billion, indicating slight growth. Additionally, Broadcom increased its quarterly dividend by 11% to $0.59 per share.
- In Q4, chip segment revenue rose by 12% year-over-year and 13% sequentially, reaching $8.2 billion. The AI segment is thriving, with AI revenue up 150% year-over-year to $3.7 billion. However, non-AI semiconductor revenue fell by 23% year-over-year to $4.5 billion, though it has improved 10% from its bottom six months ago and is expected to decline only in the mid-teens in Q1.
- Networking revenue grew 45% year-over-year to $4.5 billion, with AI networking revenue increasing by 158% and making up 76% of total networking revenue. This growth was driven by a doubling of AI XPU shipments to three hyperscale customers and a fourfold increase in AI connectivity revenue. Broadcom plans to ship its next-generation 3-nanometer XPUs to hyperscale customers in the second half of FY25.
- The wireless segment, spurred by a seasonal launch from a North American customer (likely Apple), saw Q4 revenue rise to $2.2 billion, a 30% sequential increase. Despite reports of Apple (AAPL, Financial) developing its own chips, Broadcom remains engaged with Apple in multi-year roadmaps for various technologies. Recent reports also suggest collaboration on AI chips.
- Server storage revenue recovered by 20% over the past six months to $992 million in Q4, while broadband hit a low at $465 million, down 51% year-over-year. Broadcom anticipates a broadband recovery starting in Q1, with industrial revenues, which account for just 1% of total revenues, expected to recover in the second half of 2025.
- Broadcom's outlook for its semiconductor business over the next three years is optimistic, especially in AI. It currently collaborates with three hyperscale customers on a multigenerational AI XPU roadmap. By 2027, each customer plans to deploy one million XPU clusters on a single fabric, representing a serviceable AI revenue market of $60-90 billion for XPUs and networks in FY27. Broadcom aims to secure a leading market share in this area.
The Q4 results and guidance were solid, with the dividend increase likely pleasing investors. However, Broadcom's ambitious AI segment plans and collaboration with a major wireless company, presumably Apple, are key factors driving the stock's rise.
