Broadcom has set an optimistic outlook for fiscal year 2025 (FY25), projecting first-quarter revenue of $14.6bn, a 22% year-on-year (YoY) increase. The company anticipates robust demand for its custom AI chips, predicting AI revenues to grow by 65% in Q1 to $3.8bn. The semiconductor and infrastructure software solutions provider CEO and president Hock Tan highlighted the transformative potential of AI for Broadcom, estimating the segment could generate $60bn to $90bn annually by fiscal 2027. Shares of the California-based company surged 14% in response to the announcement.
For the fourth quarter of fiscal year 2024 (Q4 FY24), Broadcom reported consolidated revenue of $14.054bn, a 51% increase compared to the corresponding period of the previous year. However, revenue slightly missed Wall Street forecasts of $14.09bn.
The company’s semiconductor segment, bolstered by a 220% surge in AI-related revenues to $12.2bn, was a significant contributor to its overall growth. Infrastructure software revenue, supported by the integration of VMware, also grew 196% year on year to $5.8bn, further enhancing Broadcom’s performance.
Broadcom’s advanced AI semiconductor solutions, including custom accelerators and networking chips, have gained traction among hyperscale customers. These types of chips are essential for generative AI applications, such as OpenAI’s ChatGPT, and are often deployed at scale by cloud providers. Networking chips accounted for a significant share of the company’s growth, with AI-related networking revenues climbing 158% YoY.
Integration of VMware boosts infrastructure business
Broadcom also reported strong cash generation in Q4, with $5.5bn in free cash flow, equating to 39% of revenue. “The reality going forward for this company is that the AI semiconductor business will rapidly outgrow the non-AI semiconductor business, said Tan emphasising the company’s focus on AI.
Tan also noted the company’s success in shipping next-generation AI chips in three-nanometre technology, with volume production expected in the second half of fiscal 2025. Meanwhile, Broadcom is focusing on creating long-term roadmaps with major clients to sustain its leadership in the AI semiconductor market.
The $69bn VMware acquisition, completed earlier this year, has significantly bolstered Broadcom’s infrastructure software segment. Despite protests from customers over ostensibly huge price increases, VMware’s annualised booking value increased to $2.7bn in Q4, and its operating margin rose to 70%, up from less than 30% before the acquisition. Broadcom also reported cost efficiencies, reducing VMware’s quarterly operating expenses to $1.2bn from $2.4bn pre-acquisition.
Read more: Broadcom reports $1.87bn loss in Q3 FY24 despite robust AI chip revenue
