Live Updates: Will Broadcom (AVGO) Soar After Tonight's Earnings?

As of 5:55 p.m. ET, Broadcom is holding at around 13% gains. I expected some of the clarifications later on the call around the market size the company sees to move the stock up even more, but it appears to be holding in the 12% range.

Wall Street commentary will be interesting tomorrow. The company didn’t give any specific 2025 AI revenue guidance, which is a negative.

On the other hand, they gave forward commentary on the next three years that’s far more bullish than current consensus.

This concludes Broadcom’s conference call. Check back to 24/7 Wall Street tomorrow for more analysis on the call.

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If you’ve been investing in AI for multiple years, you’ve seen some historic quarters.

When NVIDIA first reported a massive inflection point in revenue in early 2023 and some of the reports from Super Micro Computer in early 2024 changed how people thought about the AI market.

One question is whether Broadcom CEO Hock Tan’s projections from this call will do the same for stocks levered to data center spending across the next three years.

Clearly, the company sees a massive inflection point in custom AI networking and chip sales. That’s in chips designed by hyperscalers and networking.

It will be interesting how Wall Street digests Broadcom’s earnings in the days to come. Does their view into the future point to hyperscalers betting on their own custom chips and networking at the expense of NVIDIA?

Or, is this just an incredibly bullish call that lifts all ships?

Regardless, the long-term numbers Broadcom quoted tonight point to large hyperscalers having massive growth plans in the years to come beyond what Wall Street expects today.

Analysts on the call are clearly blown away by the projection that Broadcom could see TAM of $60 to $90 billion from its top 3 hyperscaler customers by 2027.

Tan has clarified that number is just three companies and it’s not cumulative number but rather just revenue figures for 2027.

Further, Tan gave a nuanced answer that the other two customers revealed today could be just as large.

Wow. Expect Wall Street to focus in on these figures tomorrow and its likely Broadcom will be going much higher than its current 12% gains. 

Analysts on the call have noted that Broadcom didn’t update their Fiscal 2025 AI figure and are trying to ask leading questions on the subject.

One analyst just asked if Broadcom should see AI growth in line with hyperscalers spending growth (quoted at 35% to 40%), and Tan was evasive with his answer saying not to use those figures.

Broadcom CEO Hock Tan just clarified his ‘TAM’ comment was actually referring to just three top hyperscalers. I may need to clarify that comment later – come back to 24/7 Wall St tomorrow for more earnings analysis – because if the $60 to $90 billion figure is just revenue from a top three customers by 2027, then Broadcom could have a massive day tomorrow.

Once again, pay attention to that comment, it could lead to a massive reaction in Broadcom’s earnings if what I heard on the call was correct.

Broadcom shares are spiking following Hock Tan’s comments on additional hyperscalers engagements and future total addressable market size.

Shares are now up 9%.

Broadcom’s stock began soaring as Tan revealed hyperscaler engagements and longer-term TAM. The stock went from up 2% to up 5% within minutes.

It’s unclear if the company will update a Fiscal 2025 AI revenue target on the call, but that section seemed to be enough for Wall Street to be happy with the call.

Hock Tan took time to outline the company’s long-term perspective on the semiconductor business:

• Tan noted non-AI semiconductor business bottomed at $17.8 billion in Fiscal 2024
• Calls opportunity in AI “massive” and notes more hyperscalers are beginning to develop their own custom AI accelerators
• Emphasizes this isn’t a quarter-to-quarter journey. Emphasizes working with three hyperscalers working on their own custom accelerators, and notes that each of these companies expects to create 1 million-plus chip clusters.
• Sees a TAM of $60 to $90 billion in custom accelerators in 2027, and says the company can dominate this market. But wants to emphasize this won’t be a linear ramp.
• Reveals the company has been selected by two additional hyperscalers and developing XPUs. Expects both of these customers to contribute revenue before 2027, which shows the ramp required from beginning a custom XPU engagement to revenue at scale (keep in mind Broadcom is now on its sixth generation with Google on TPUs). 

• AI networking revenue growing 158% year-over-year and now represents 76% of networking revenue.
• Next-generation XPUs are in 3 nanometers and are on track for volume shipment in the second half of fiscal 2025 (beginning in the spring of next year)

Some figures from Broadcom’s conference call:

• CEO Hock Tan thanks two areas for Broadcom’s ‘transformative’ year. The first is their acquisition of VMware, which Tan says is progressing ahead of prior profit targets the company has set. The second is the growth of artificial intelligence.
• While Broadcom missed on software sales, it’s likely that spending cuts in VMware contributed to the company projecting gross margins of 66% next quarter, which is significantly ahead of Wall Street’s expectations of 63.5%.
• AI sales are now 41% of semiconductor revenue.

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We are now just five minutes from Broadcom’s conference call. Gains have come back a bit, with the stock now up 2% after-hours.

We will continue to update this live blog with anything noteworthy from Broadcom’s call.

Broadcom has settled into a 5% gain after-hours. It will likely hold around those gains until the company’s conference call.

The number one discussion to be on the lookout for is what kind of AI revenue guide is provided for Fiscal 2025. 

It is likely Broadcom has lagged peers like Marvell (Nasdaq: MRVL) in recent months because their prior AI revenue guidance was ‘weaker’ than expected.

Broadcom had guided Fiscal 2024 AI revenue to $12 billion (off a former guide of $11 billion). A guide could come in above expectations, especially if a strong ramp of Google V6p TPU occurs in the second half of Fiscal 2025.

Looking more closely at Broadcom’s earnings here’s a ledge of the positives and the negatives:

Positives

• Adjusted EPS last quarter of $1.42 topped consensus of $1.39
• AI revenue of $12.2 billion for the fiscal year tops prior guidance of $12 billion (and is up 220% year-over-year).
• Revenue guidance for next quarter does slightly beat expectations.
• Semiconductor revenue topped expectations last quarter, coming in at $8.23 billion versus expectations of $8.05 billion.
• The company continues to raise its quarterly dividend, which is now at $.59 per quarter.

Negatives

• Most companies in Broadcom’s position would be punished for merely meeting expectations for next quarter. As noted in a prior update, the strong initial reaction to Broadcom’s guidance is likely because Wall Street was worried about an ‘air pocket’ caused by revisions to Google’s Tensor Processing Unit that forms the majority of Broadcom’s AI chip revenue.
• Broadcom’s software revenues were weak, coming in at $5.82 billion versus expectations of $6.03 billion. Overall, most of the company’s value comes from the expectation semiconductor sales should soar in the years to come thanks to AI, so the market seems willing to overlook this.

Broadcom just announced fourth-quarter earnings, the company’s stock immediately jumped 6% in reaction to fourth-quarter numbers.

Here are some of the highlights:

• Revenue: $14.05 Billion (versus expectations of $14.07 Billion)
• Non-GAAP Net Income of $6.96 Billion
• Non-GAAP diluted EPS of $1.42 (versus expectations of $1.39 per share)
• $5.482 billion in free cash flow

And for guidance:

• $14.6 billion in revenue next quarter
• Adjusted EBITDA of 66% (versus 65% in the latest quarter)

These aren’t blowout numbers with revenue slightly below expectations and guidance next quarter hitting Wall Street’s estimates almost exactly.

However, fears of the “air pocket” from Google’s TPU chips may have factored into diminished expectations heading into earnings. We’ll continue unpacking Broadcom’s earnings in this live blog, so make sure to refresh for more updates.

Broadcom’s largest custom chip customer is Google. Broadcom has helped designed Google’s TPU chip and collects the majority of their custom chip revenue from the company.

However, supply chain chatter has indicated a transition between version 6 of Google’s TPU (V6e to V6p) could lead to a shortfall in guidance next quarter.

Broadcom also has custom AI chip design relationships with Meta, ByteDance, and reports this week point to them winning Apple’s business as well. However, Google should stay front and center as the company’s largest customer next year.

If Broadcom reports weak guidance next quarter, updating AI revenue for 2025 in their conference call could lead to a reversal in any immediate reaction to the company’s share price after earnings numbers drop.

Implied volatility from options markets is a movement of 6.7% after earnings for Broadcom. That’s lower than many peers (including the implied volatility for NVIDIA before its last earnings).