Broadcom Inc AVGO

Broadcom Earnings: Another Excellent Period for AI Brings Our Forecast and Valuation Up

We raise our fair value estimate for wide-moat Broadcom to $1,550 per share from $1,350 as we raise our medium-term growth forecast for artificial intelligence revenue. AI chip sales exceeded our expectations, and management raised its full-year guide for AI and total firm revenue. Even so, we see the new fiscal 2024 AI guidance as conservative and model further upside. Broadcom’s impressive AI results lend credence to our long-term thesis for networking to benefit from robust generative AI investment and for Ethernet to take share within generative AI networks. Positively, Broadcom also raised its guidance for VMware cost-cutting in fiscal 2024, which we believe will help short-term margins. Shares rose more than 10% after-hours, aligning with our valuation raise. We continue to see Broadcom’s valuation as challenging, reflecting even more robust AI sales growth than our bullish expectations.