Broadcom stock rocketed on Friday after the fabless chipmaker and infrastructure software provider delivered a beat-and-raise earnings report and touted its robust AI chip business.
Broadcom late Thursday said its earnings rose 36% year over year to an adjusted $1.69 a share in its fiscal third quarter ended Aug. 3. Sales increased 22% to $15.95 billion. Analysts polled by FactSet had expected Broadcom to earn $1.66 a share on sales of $15.83 billion.
The Palo Alto, Calif.-based company said its AI chip revenue growth accelerated to 63% in Q3 to $5.2 billion. It forecast Q4 AI chip sales of $6.2 billion, up 66%.
Broadcom also announced orders from a fourth customer, likely OpenAI, for its custom AI data center processors. It already makes such chips for Alphabet unit Google, Facebook parent Meta Platforms and TikTok parent ByteDance. Analysts say the AI accelerator sales also are boosting the company's networking chip sales.
On the stock market today, Broadcom stock jumped 9.4% to close at 334.89. Earlier in the session, it hit a record high of 356.24.
On a conference call with analysts, Broadcom Chief Executive Hock Tan said the company is gaining market share in AI chips. That news put pressure on rivals Nvidia, AMD and Marvell Technology.
Nvidia stock dropped 2.7% to 167.02 on Friday. AMD stock slid 6.6% to end the regular session at 151.14. Marvell stock fell 1.2% to 63.33.
CEO Extends Contract Through 2030
"Demand for custom AI accelerators from our three customers continued to grow as each of them journeys at their own pace toward compute self-sufficiency. And progressively, we continue to gain share with these customers," Tan said. "Further to these three customers, as we had previously mentioned, we have been working with other prospects on their own AI accelerators."
One of those prospects, believed to be OpenAI, has ordered over $10 billion worth of AI racks based on Broadcom's AI chips. That new business will "significantly" improve Broadcom's AI revenue in fiscal 2026, Tan said. Meanwhile, the company is working with three additional prospects for its AI chip business, he said.
For the current quarter ending Nov. 2, Broadcom forecast revenue of $17.4 billion, up 24% from the same quarter last year. Wall Street was modeling $17.01 billion in sales in the fiscal fourth quarter.
In other news, Tan extended his contract with Broadcom and will remain CEO through at least 2030, removing an investor concern.
Broadcom Stock Scores Price-Target Hikes
At least 22 Wall Street firms raised their price targets on Broadcom stock after its fiscal Q3 report.
In a client note, BofA Securities analyst Vivek Arya said Broadcom delivered a "shock-and-awe" quarterly report. He reiterated his buy rating on Broadcom stock and hiked his price target to 400 from 300.
Oppenheimer analyst Rick Schafer maintained his outperform rating on Broadcom stock and upped his price target to 360 from 325. He titled his report on Broadcom's earnings news "Christmas Comes Early."
Melius Research analyst Ben Reitzes said Broadcom's outlook was an "AI guide for the ages."
"This call led by CEO Hock Tan was one of the most bullish and memorable calls we can remember (and we mean no offense toward Jensen Huang or Steve Jobs either)," Reitzes said in a client note. "What matters is that AI revenues are accelerating — much more than we could have dreamed even with checks showing that 'builds' and Google trends were surging."
Reitzes kept his buy rating on Broadcom stock and increased his price target to 415 from 335.
Broadcom Appears On Three IBD Lists
JPMorgan analyst Harlan Sur reiterated his overweight rating on Broadcom stock and hiked his price target to 400 from 325.
"We continue to believe SoftBank/Arm is the next high priority AI ASIC (application-specific integrated circuit) project and could be Broadcom's next major customer," Sur said in a client note.
Broadcom stock is on three IBD lists: Leaderboard, Big Cap 20 and Tech Leaders.
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