Broadcom shares surged 16% in extended trading after the company reported better-than-expected earnings in the first quarter of fiscal year 2025 (Q1 FY25). Its strong second-quarter revenue forecast reassured investors, easing concerns over AI chip demand. Broadcom’s announcement followed a weaker outlook from rival Marvell Technology, which had raised investor worries about the AI semiconductor market.
The semiconductor firm posted first-quarter revenue of $14.92bn, exceeding analyst expectations of $14.61bn. It also surpassed its own December 2024 forecast of $14.6bn. The Q1 FY25 revenue grew by 25% compared to the revenue in the same period during the previous fiscal year. Adjusted earnings per share for the reported quarter stood at $1.6, above the projected $1.49. Broadcom’s performance reflected strong momentum in AI chip sales, which contributed to significant growth in its semiconductor division.
AI revenue growth and expanding customer base
Broadcom reported $4.1bn in AI-related revenue, marking a 77% year-over-year increase. This growth was driven by strong adoption of its custom AI accelerators, which fall under the company’s semiconductor solutions business. The segment itself grew 11% annually, generating $8.21bn during the quarter.
Broadcom finds itself as a key supplier of custom AI chips, particularly for cloud providers seeking alternatives to Nvidia’s dominant AI processors. The company had previously disclosed partnerships with three major cloud customers for custom AI chip development. CEO Hock Tan stated that Broadcom has since engaged with two additional hyperscale clients and is in discussions with four more potential customers, further expanding its foothold in the AI semiconductor market.
These new engagements, however, are not yet included in Broadcom’s projected long-term revenue opportunity, which the company estimates to be between $60bn and $90bn by 2027.
For the second quarter of fiscal 2025, Broadcom expects revenue of approximately $14.9bn, slightly above analyst estimates of $14.76bn. The company also forecasted adjusted EBITDA to represent approximately 66% of projected revenue. AI chip sales are expected to rise to $4.4bn, with demand driven by hyperscale customers expanding their AI infrastructure.
The infrastructure software segment also delivered robust results, with revenue increasing 47% to $6.7bn, surpassing expectations of $6.49bn. Broadcom attributed the growth to higher enterprise adoption of its software solutions, including products inherited from its $69bn acquisition of VMware, which was completed in November 2023.
Broadcom is among several semiconductor companies evaluating Intel’s advanced 18A manufacturing process, which represents one of the most advanced chip fabrication technologies available. The company has tested wafers in Intel’s factories but has yet to confirm whether it will commit to the process for full-scale production.
Last month, The Wall Street Journal reported that Broadcom and Taiwan Semiconductor Manufacturing Company (TSMC) were in separate discussions about potential acquisitions involving Intel. Both companies have been informally evaluating different segments of Intel’s business, though no formal bids have been submitted.
Read more: Intel faces potential breakup as TSMC and Broadcom weigh separate deals
