Broadcom hits record $446 ahead of earnings as AI revenue doubles

Broadcom Inc. shares surged nearly 5% on Friday to close at an all-time high of $446.77, pushing the chip designer's market capitalization past $2.1 trillion ahead of its fiscal second-quarter earnings report on Wednesday.

"The results validate our AI strategy," Broadcom CEO Hock Tan said on the fiscal first-quarter earnings call, adding that the company has "line of sight to achieve AI revenue from chips, just chips, in excess of $100 billion in 2027" with capacity secured through 2028.

AI revenue reached $8.4 billion in fiscal Q1, more than doubling from a year earlier and exceeding the company's own guidance. That lifted semiconductor solutions revenue to a record $12.5 billion, up 52%, and total revenue to $19.3 billion, up 29%. For fiscal Q2, management guided for AI semiconductor revenue of $10.7 billion, implying 140% year-over-year growth. Wall Street expects adjusted EPS of about $2.39 on roughly $22 billion in revenue, up 51% and 47% respectively. Free cash flow reached $8 billion in fiscal Q1, or 41% of revenue, while non-GAAP net income grew 30% to $10.2 billion.

The record price leaves little room for error. At Friday's close, Broadcom trades at roughly 87 times trailing earnings, or about 61 times on an adjusted basis after stripping out non-cash amortization tied to its VMware acquisition. The custom chips Broadcom designs for hyperscalers including Alphabet's Google, Meta Platforms, Anthropic and OpenAI now account for the bulk of its growth, with the top five end customers representing roughly half of total revenue in fiscal Q1. Analysts remain bullish: Susquehanna's Christopher Rolland raised his price target to $490 from $450, and Aletheia Capital's Stefan Chang lifted his to $525 from $500, citing momentum in Broadcom's custom ASIC and networking portfolio. The stock also got a boost from a $36 billion debt deal backed by Apollo and Blackstone to fund Anthropic's AI infrastructure expansion, with Broadcom backstopping payments on the largest portion.

The guidance raise signals management expects AI infrastructure demand to accelerate through 2027. Investors will scrutinize the fiscal Q2 earnings call on Wednesday for updated segment margins and any changes to the $100 billion AI revenue target.

This article is for informational purposes only and does not constitute investment advice.