Broadcom's AI Boom: Citi Sets $220 Target as Revenue and Dividends Soar

Broadcom Inc. (AVGO), a global technology leader in semiconductor and infrastructure software solutions, has seen its stock surge following a strong fiscal fourth-quarter earnings report. The company's shares jumped nearly 20% in early trading on Friday, pushing its market capitalization above the $1 trillion level. This surge comes after Broadcom announced a pair of new AI customers on its earnings call, which Citi analysts speculated could be Apple and OpenAI. Citi raised its price target for Broadcom stock to $220 from $205, anticipating growing AI revenue in the coming years.

Broadcom's fiscal fourth-quarter revenue grew 51% year-over-year to $14.05 billion, driven by a 220% increase in AI-related sales to $12.2 billion. The company's net income rose to $4.32 billion, or $0.90 per share, from $3.52 billion, or $0.83 per share, in the prior year quarter. Excluding one-time items, Broadcom's net income was $6.965 billion, or $1.42 per share. The company's adjusted EBITDA margin was 65% for the quarter, and its free cash flow was $5.482 billion, or 39% of revenue.

Broadcom's CEO, Hock Tan, forecasted that the AI market for accelerators and networking will reach $60-$90 billion by fiscal 2027. The company's strong AI pipeline and strategic partnerships, such as its work with Apple on an AI server processor, have driven its AI revenue growth. Broadcom's acquisition of VMware in November 2023 has also contributed to its revenue growth, with the company's infrastructure software revenue growing by 196% year-over-year to $21.5 billion.

Broadcom's strong financial performance has led to an increase in its quarterly common stock dividend, which rose by 11% from the prior quarter to $0.59 per share. The company's target annual common stock dividend for fiscal year 2025 is $2.36 per share, which is a record and the fourteenth consecutive increase since the company initiated dividends in fiscal 2011.

Broadcom's AI strategy is focused on providing custom-built accelerators and Ethernet networking solutions for AI infrastructure, which is a growing market. The company's AI-related sales grew by 220% in fiscal 2024, reaching $12.2 billion. Broadcom's CEO, Hock Tan, forecasts that the AI market for accelerators and networking will reach $60-$90 billion by fiscal 2027.

In comparison, Nvidia is a leading player in the AI market, offering a wide range of AI-specific hardware solutions, such as the Nvidia A100 and the upcoming H100. Nvidia's data center revenue, which includes AI-related sales, grew by 34% year-over-year in its fiscal Q2 2024. AMD, on the other hand, has been expanding its AI offerings with products like the Instinct MI250 and the upcoming Instinct MI300. AMD's AI-related revenue has been growing, but the company has not disclosed specific figures.

Broadcom's AI strategy is focused on providing custom-built solutions for AI infrastructure, which is a growing market. The company's AI-related sales grew by 220% in fiscal 2024, reaching $12.2 billion. Broadcom's CEO, Hock Tan, forecasts that the AI market for accelerators and networking will reach $60-$90 billion by fiscal 2027.



Broadcom's acquisition of VMware in November 2023 has been transformational for the company, driving significant growth in its infrastructure software segment. In fiscal year 2024, Broadcom's infrastructure software revenue grew by 196% year-over-year to $21.5 billion, with VMware contributing significantly to this growth. This acquisition has also helped Broadcom achieve record adjusted EBITDA margin of 65% and generate $17.6 billion in free cash flow, or 49% of revenue. As a result, Broadcom has increased its quarterly common stock dividend by 14% to $5.25 per share for fiscal year 2024, with the target annual common stock dividend of $21.00 per share being a record and the thirteenth consecutive increase since the company initiated dividends in fiscal 2011.

Broadcom's strong financial performance and growth prospects have led analysts to raise their price targets for the company's stock. Citi raised its price target to $220 from $205, anticipating growing AI revenue in the coming years. Bank of America also raised its price target to $250 from $215, projecting AI revenue of $30 billion by the end of 2027. Mizuho raised its price target to $245 from $220, projecting AI revenue of more than $50 billion in fiscal 2027.

In conclusion, Broadcom's strong fiscal fourth-quarter earnings report and growing AI revenue have driven its stock price to new highs. The company's strategic partnerships and acquisition of VMware have contributed to its revenue growth and dividend increases. As the AI market continues to grow, Broadcom is well-positioned to capitalize on its market potential and generate strong returns for investors.