The Future of Broadcom: A Look at Second-Quarter Earnings and AI Revenue Growth
Key Takeaways
- Broadcom is set to release its second-quarter 2024 earnings report after the bell on Wednesday, June 12.
- The company is expected to report that revenue gained sequentially and from the year-ago period.
- Investors are likely to be watching for revenue growth related to artificial intelligence (AI) as Broadcom’s networking and semiconductor businesses offer products used in AI data centers.
- Broadcom may also provide updates on its custom AI chip projects with hyperscaler customers.
Broadcom (AVGO) is gearing up to announce its second-quarter earnings for fiscal 2024 after the bell on Wednesday, June 12. Investors are eagerly anticipating the results, particularly looking for signs of revenue growth driven by artificial intelligence (AI) and any updates on Broadcom’s custom AI chip products for major tech clients.
Analysts have estimated Broadcom’s revenue for the second quarter of 2024 to be around $12.04 billion, showing an increase from the previous quarter and a substantial jump from the $8.73 billion reported in the same period in 2023. Net income is expected to reach $2.22 billion, a rise from the first quarter but a decline from $3.48 billion in the second quarter of fiscal 2023. Diluted earnings per share (EPS) are projected to be $4.88, compared to $8.15 in the same period a year earlier.
After adjusting for certain one-time expenses, non-GAAP net income is forecasted to be $5.33 billion, up from $5.25 billion in the first quarter of 2024 and $4.49 billion in the second quarter of 2023. The company has reported increased restructuring costs following its acquisition of software firm VMware and has indicated plans to pay down debt in fiscal 2024.
Key Metric: AI-Driven Revenue Growth
Broadcom has been capitalizing on the AI era, with its networking infrastructure and semiconductor segment offerings being utilized in AI data centers. CEO Hock Tan highlighted in March the strong demand for their networking products in AI data centers and custom AI accelerators from hyperscalers, which are propelling growth in the semiconductor segment. The company aims to generate $10 billion in AI chip sales in 2024.
Analysts are expecting semiconductor revenue to come in at $7.12 billion, slightly down from the previous quarter but up from the $6.81 billion recorded in the year-ago period. Networking revenue is projected to reach $4.93 billion, showing sequential growth and a significant increase from $1.93 billion in the second quarter of 2023.
Business Spotlight: Positioned To Gain as Hyperscalers Make Custom Chips
Broadcom has carved out a niche in AI with major tech companies developing their custom chips for AI workloads. The company is a leader in designing custom AI chips for hyperscalers like Google, Meta, and ByteDance. Analysts at Melius Research are optimistic about the potential $10 billion+ AI revenue stream, especially as hyperscalers ramp up investments in custom chips.
Tech giants such as Meta, Google, Microsoft, and Amazon are investing heavily in custom, in-house, AI-capable chips. Recent reports indicate an uptick in spending by big tech companies to bolster their AI capabilities, which could bode well for Broadcom.
Melius Research analysts believe that AI revenue could reach $50 billion within a reasonable timeframe, particularly if Broadcom secures additional customers for custom accelerators. The company recently announced an agreement with a third customer focused on consumer AI.
In its upcoming earnings call, Broadcom may provide updates on existing custom AI chip projects and potential deals with new customers. The company’s shares have seen a nearly 27% increase since the beginning of the year, closing at $1,413.09 on Wednesday, June 5.
As Broadcom prepares to unveil its second-quarter earnings, all eyes are on the company’s performance in the AI space and its ability to capitalize on the growing demand for custom chips among hyperscalers.
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