Semiconductor company Broadcom became the 10th stock to reach $1 trillion in market cap.
Semiconductor company Broadcom (NASDAQ:AVGO) recently joined an exclusive club, as it crossed the $1 trillion mark in market cap.
It became the 10th trillion-dollar company after its market cap soared to $1.05 trillion Friday. The catalyst that pushed Broadcom over the line was its fiscal fourth quarter earnings report and robust 2025 outlook, which sent the stock skyrocketing some 33% since Friday morning.
The stock jumped 24% on Friday and another 8% on Monday.
For context, the other nine in the trillion-dollar club are the Magnificent Seven – Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, and Tesla – along with Saudi Aramco and Taiwan Semiconductor.
Here’s how Broadcom got there.
AI revenue drives earnings
Broadcom had a strong fourth quarter, driven by its AI chips that facilitate the movement of data across mobile and broadband networks.
Revenue in the quarter jumped 51% year-over-year to $14.1 billion, which was a tick below estimates. But given the huge gains, investors did not hold that against Broadcom.
Net income came in at $4.3 billion, or 90 cents per share, which was up 22% from the same quarter a year ago. Non-GAAP net income was $6.96 billion, or $1.42 per share, which was up 44% over the same quarter a year ago. This beat analysts’ estimates of $1.39 per share in adjusted earnings.
For the full fiscal year ended November 3, Broadcom generated $51.6 billion in revenue, a record. That marked a 44% jump compared to 2023. Of that amount, $12.2 billion came from its AI chips, representing a 220% increase over the previous year. That accounted for about 41% of all semiconductor revenue.
Net income for the year was $5.9 billion, or $1.23 per share, down from $14.1 billion the previous year, but that was severely impacted by the acquisition of VMware within the past fiscal year. But the acquisition did help boost revenue in its infrastructure segment by 42% for the year to $21.5 billion.
And now that VMware has been fully integrated, the company expects this high margin business to see incremental earnings growth in 2025 at a higher level than initially expected.
“Massive” AI opportunity
The primary reason that Broadcom stock spiked 24% on Friday and another 8% on Monday to around $242 per share is its long term outlook.
In the fiscal first quarter of 2025, Broadcom anticipates $14.6 billion in revenue, which would be up from $14.1 billion last quarter. Adjusted EBITDA is expected to be 66% of revenue, up from 64% in Q4.
But on the earnings call, CEO Hock Tan talked about the “massive” opportunity he sees in AI over the next three years.
In 2027, the company targets potential AI revenue of $60 billion to $90 billion from its three major AI hyperscalers, which are Alphabet, Meta Platforms, and ByteDance – the owner of TikTok, according to analysts, reported Investor’s Business Daily. That would be five times higher than 2024 AI revenue at the low end.
Tan said this was not guidance, it was just the AI revenue serviceable addressable market from Broadband’s three main hyper scalers.
“But we do want to give you a sense of where this journey is headed. We want to give you a sense of where this could lead us this company in terms of its AI semiconductor AI revenue trajectory,” Tan said on the earnings call. “We are very well positioned to achieve a leading market share in this opportunity and expect this will drive a strong ramp from our 2024 AI revenue base of $12.2 billion.”
The CEO also added that Broadcom has been selected by two additional hyperscalers to provide AI chips, which would increase the revenue opportunity even more. One of them is reported to be Apple, according to Reuters and other sources.
Analysts’ raise price targets
Broadcom got some huge analysts upgrades after reporting earnings and discussing its outlook. Wells Fargo raised its price target by $60 per share to $230, while Bernstein increased it by $55 to $250 per share. Also, Morgan Stanley hiked it by $53 per share to $233.
Broadcom stock is currently trading at $240 per share and is up 115% year-to-date after the massive gains of the past two days. It seems as if most of the gains the analysts projected came over the course of two days. I would guess in the coming weeks that Broadcom’s median target will be revised upwards a bit.
Broadcom is a great long-term stock, but it may not be wise to hop on board now after the stock price has increased by one-third. The P/E ratio has soared to 174, with a forward P/E at 36. It could come back a bit after this recent surge, so look for a good opportunity to get in at a lower valuation.
