The chipmaker’s share price climbed after publishing strong third-quarter revenue and providing upbeat guidance in its latest earnings report.
Broadcom stock rose by 4.5% in after-hours trading on the back of strong fiscal third-quarter earnings that beat analysts’ expectations. Investors responded positively to the company’s earnings beat and upbeat guidance driven by increasing demand for artificial intelligence (AI) chips.
The chipmaker reported revenue of $15.95 billion, up around 22% from the previous year and slightly above Wall Street expectations. There was also a significant turnaround in its net income figures, which reached $4.14 billion. In the same period last year, it recorded a $1.88 billion loss.
Elsewhere, non-GAAP net income increased to $8.4 billion compared with $6.12 billion during the corresponding quarter in 2024. Added to this, AI revenue grew 63% year-over-year to $5.2 billion, accounting for more than half of all semiconductor sales.
In terms of its Q4 outlook, the firm is projecting a rise in its AI semiconductor revenue to $6.2 billion. It also expects revenue of around $17.4 billion, above analyst estimates of $17.01 billion. This guidance follows 11 consecutive quarters of growth for the tech giant.
Shares in the company have gained 33% in value since the start of the year and nearly doubled over 12 months. The company’s market capitalisation now stands above $1.4 trillion, underlining the impact of the AI surge.
Broadcom stock price surges overnight
Following the Q3 earnings report released on Thursday, Broadcom (AVGO) shares spiked, rising 4.58 after-hours trading. The share price climbed as high as 7% in pre-market trading hours, reflecting renewed confidence in Broadcom stock from investors.
Retail sentiment relating to Broadcom also shifted to “extremely bullish,” with message activity rising to “extremely high” levels. This placed AVGO shares among some of the most discussed equities online over the past 24 hours.
Meanwhile, the company’s board approved a quarterly cash dividend of $0.59 per share, payable at the end of September. Management said the dividend reflects confidence in the company’s growth and cash generation.
A closer look at Broadcom’s Q3 results
Broadcom posted adjusted EBITDA of $10.7 billion, equal to 67% of revenue, representing an annual increase of 30%. Free cash flow grew 47% year-on-year to a record $7 billion, highlighting the company’s strong financial base.
The semiconductor solutions unit generated $9.17 billion in sales, rising 26% compared with the same period last year. Infrastructure software revenue increased 17% to $6.79 billion, driven by VMware and related products.
Broadcom has emerged as a major player and key beneficiary of the ongoing AI boom. Tech giants such as Google already rely on its custom accelerators to manage demanding data centre workloads.
Major new deals on the way for Broadcom
Hock Tan, CEO of Broadcom, confirmed it had secured more than $10 billion in orders for its XPU processors. He explained that one customer had placed production orders, making them a qualified buyer of the company’s infrastructure chips.
Industry speculation has increased around the identity of the customer. Some believe it is OpenAI, developer of ChatGPT, which reportedly plans to design its own chips with Broadcom’s support. Sources told the Financial Times that OpenAI intends to deploy the processors internally next year.
If confirmed, OpenAI would become Broadcom’s fourth major AI client, joining several existing unnamed hyperscale customers. Tan said these deals should drive further acceleration in AI revenue through to next year.
Remember to stay updated with all the latest Market News at FXTrustScore.com.
