MW Broadcom's stock cools off even as earnings show robust AI demand
5:33 PM ET 6/5/25 | MarketWatch
By Britney Nguyen
AI revenue was up 46% in the latest quarter and could see accelerating growth in the current quarter
Broadcom Inc. edged past Wall Street's expectations with its outlook for the current quarter on Thursday, but that wasn't enough to lift its stock in the extended session.
The semiconductor and software company set its July-quarter guidance at $15.8 billion, coming in above expectations for $15.7 billion, according to analyst estimates compiled by FactSet.
But Broadcom shares (AVGO) were falling 3% in Thursday's after-hours action, as investors perhaps took a breather following the roaring rally of the past couple months. Through Thursday's close, Broadcom's stock had climbed 78% off its April closing low.
The company essentially matched the FactSet consensus with its record second-quarter revenue of $15.0 billion for the April quarter - up 20% from the previous year. The company reported adjusted earnings of $1.58 per share, beating analysts' expectations of $1.57 by a cent.
Broadcom Chief Executive Hock Tan called out "continued momentum in AI semiconductor solutions" in a statement, while also noting that the company's VMware business helped performance. He said he expects AI semiconductor revenue to come in at $5.1 billion in the current quarter, which would mark the 10th quarter in a row of growth, "as our hyperscale partners continue to invest."
April-quarter AI revenue grew 46% from the previous year to more than $4.4 billion, Tan said, due to demand for Broadcom's AI networking offerings. The company expects accelerating growth in the current period.
Ahead of earnings, Melius Research analysts called Broadcom stock "one of the 'must-own' AI stocks" in a note last week, due to its impressive position among fabless chip providers. The company's switching business, which makes up about 30% of its total AI revenue, is expected to grow in the next few years as its customers scale AI chip clusters, the analysts said.
See more: Why this chip stock is still deemed a 'must-own' AI play - despite its 70% surge in a year
Broadcom is "uniquely" positioned to benefit in the long term in the AI-computing hardware market, the analysts noted, because it can offer AI chips for both high performance and cost-effective performance.
And the Melius analysts said Broadcom is set to see higher profits from its ownership of cloud-computing company VMware due to its existing status as a market leader. Tan "has created a portfolio of high-margin and sticky assets," they said.
C.J. Muse of Cantor Fitzgerald, who expected a beat-and-raise report for Broadcom, said in a weekend note that investors will be looking for executives to comment on its earnings call about about near-term demand for its custom silicon and ramps of Google's (GOOGL) (GOOG) next-generation v6 and following v7p tensor processing units.
Also read: Broadcom's stock shoots for record high as excitement builds ahead of earnings
Muse also said investors will be listening for details on the four customers Broadcom has said it is engaging with on its custom-silicon offerings.
"Beyond the identity, investors will look for any additional color on the timing, ramp and sizing of these major customers," Muse said.
-Britney Nguyen
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