Broadcom Provides Tech Boost as Stock Jumps on Earnings Beat and Raise

After what had been a difficult day for tech, and markets on the whole, Broadcom released earnings that indicate there could be further room in the AI trade after all with a beat on top and bottom lines. The Nasdaq 100 fell 2.79% on Thursday, barely clinging on to the 20,000 level, as Broadcom's stock (NASDAQ: AVGO) was itself pulled down 6.33% on the day. There is nothing like an earnings beat and raise to alleviate some pressure, and Broadcom duly delivered.

The company reported substantial growth in its fiscal Q1 2025, with a remarkable 25% increase in total revenue, reaching $14.9 billion. This growth was driven by a surge in AI-related revenue, which grew by 77% to $4.1billion, considerably exceeding the company's projections. Broadcom's stock price is trading up 12.67% in this morning's pre-market, regaining the $200 level as it fights against the trend with operational excellence.

EPS came in at $1.60, above the $1.51 expected by the street. Looking further into the business segments, and infrastructure software revenue also grew impressively, with the $6.7 billion a 47% YoY growth rate. This growth is largely credited to the successful integration of VMware and a strategic shift towards subscription-based models that have resonated well with the market.

The semiconductor industry continues to play a pivotal role in Broadcom's revenue, contributing $8.2 billion, an 11% improvement year-on-year. This result underscores the persistent demand and innovation in semiconductor applications, notwithstanding the complex market landscape.

AI has become a significant revenue stream for Broadcom, now amounting to $4.1 billion, which exceeds its guidance of $3.8 billion. This segment's performance reflects the company's strategic emphasis on AI technologies and the increasing adoption of AI-driven solutions across various industries.

Financially, Broadcom showed robust profitability with an adjusted EBITDA of $10.1 billion, marking a 41% increase from the previous year. The firm also reported an operating income of $9.8 billion, an increase of 44%, resulting in an operating margin of 66%. Gross margins were notably high at 79.1% of revenue.

Despite these gains, certain challenges were noted. Non-AI semiconductor revenue experienced a sequential decline of 9%, attributed to seasonal downturns in wireless. Additionally, enterprise networking remained steady due to inventory adjustments, and industrial sales saw double-digit declines in Q1, with expectations for further decline in Q2.

Broadcom's financial stability is further reinforced by its healthy cash flow, generating $6 billion in free cash flow, though affected by cash interest expenses and taxes. The company holds $9.3 billion in cash against a gross principal debt of $68.8 billion.

Future outlook for Q2 projects a revenue increase to $14.9 billion, a 19% year-on-year growth and above the $14.73 billion consensus. AI revenue is expected to reach $4.4 billion, while Infrastructure Software revenue is projected at $6.5 billion.