Broadcom (AVGO)

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Broadcom investors are bubbling this week after the company announced record results for the first quarter that beat estimates on both the top and bottom lines. Rumors are also circulating that the chip-maker may announce a 10-for-1 stock split. Sounding the coronation bell, AVGO rocketed over 12 percent in extended action.

Revenue Beats and Strong AI Demand

Quarterly revenue for the chipmaker hit $12.49 billion, up 43 percent compared with the year-ago period. It crushed analyst estimates of $11.28 billion. Broadcom CEO Hock Tan pointed to artificial intelligence as one reason demand for its products reached record heights in the quarter, with customers buying $3.1 billion in AI products alone.

VMware Integration Fuels Growth

Broadcom’s other major influence was its purchase of VMware in November 2023, when revenue from infrastructure software, which includes VMware products, began accelerating, as more and more companies invested in the company’s software stack for building private clouds.

Stock Split Makes Ownership More Accessible

In addition, Broadcom revealed that it would undertake a 10-for-1 stock split; the company will make ownership of its stock available to a larger investment ‘democracy’ on 15 July.

Solid Guidance and Continued Growth

Beyond that stellar first quarter, Broadcom upped its full-year revenue forecast to $51 billion, beating analysts’ expectations. So far, so good.

Looking at the Bigger Picture: A Leader in a Cyclical Industry

Broadcom operates in the volatile and cyclical semiconductor industry. The company has thrived over the past three years, boasting 18.7 percent average annual growth. Buyers, however, should know that short-term high growth can be followed by contractions – times when the market is ripe for picking.

Is Broadcom a Buy?

This report is for informational purposes and qualifies as stock advice or other calls to action. Broadcom, despite a fluctuating stock price throughout the past decade, had an impressive first-quarter fiscal 2023 with its guidance, expectations, and continued upward revenue trajectory. Why not continue? More importantly, investors intrigued by today’s semiconductor leadership and future opportunities for AI are directed to do more research and decide if Broadcom stocks align with one’s goals.

Beyond Broadcom: The Rise of Enterprise Software with AI

The report goes on to examine how AI capabilities are being embedded into wider classes of enterprise software. While Broadcom is a semiconductor company, AI-infused software vendors could in the future emerge as industry titans.

Inventory Management: A Sign of Strength

DIO is one of the metrics that chipmakers follow. This quarter, Broadcom reported a DIO of 53 days, which is below its historical average. This is a good sign that Broadcom is not hoarding inventory, which could build up if the company was anticipating weak demand.

Broadcom had a great first quarter. The company reported better-than-expected results, increased its full-year guidance, and announced a 4-for-1 stock split. Why did Broadcom crush expectations and skyrocket? The quarterly results should come in with nearly $8 billion in revenue, an incredible 45 percent year-over-year growth. That’s not a typo. The company continued to grow aggressively in the Semiconductor Technology Solutions segment, while the Networking segment has seen significant progress, supported by the company’s leadership in connectivity solutions for AI platforms. The credit for Broadcom’s success is simple. Continuing a strategy of broadening its customer base should enable Broadcom to continue to grow its already unique position in the complex network and infrastructure space.

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