Broadcom’s AI business surges 77% as Q1 earnings beat expectations

For Broadcom, the chips are anything but down. Q1 earnings for the chipmaker have exceeded analyst expectations, marking significant growth in its AI business and validating its strategic focus on data center infrastructure. Broadcom’s impressive performance, including a 25% revenue increase and substantial growth in AI-related sales, signals its emerging position as a key player in the expanding AI infrastructure market alongside its successful integration of VMware‘s software business.

The big picture: Broadcom reported first-quarter earnings that surpassed market expectations and provided optimistic guidance for Q2, sending its stock up 16% in after-hours trading.

• The company achieved earnings per share of $1.60 adjusted (versus $1.49 expected) and revenue of $14.92 billion (versus $14.61 billion expected).
• Broadcom projects second-quarter revenue of approximately $14.9 billion, exceeding analysts’ forecast of $14.76 billion.

Key financials: Revenue rose 25% year-over-year to $14.92 billion, while net income surged to $5.5 billion ($1.14 per share) from $1.33 billion ($0.28 per share) in the same period last year.

Behind the numbers: Broadcom’s AI business has become the driving force behind its recent growth, with AI revenue reaching $4.1 billion in Q1—a 77% increase compared to the previous year.

• These AI sales fall under Broadcom’s semiconductor solutions business, which grew 11% annually to $8.21 billion during the quarter.
• CEO Hock Tan expects “continued strength in AI semiconductor revenue,” projecting AI sales to reach $4.4 billion in the second quarter.

Why this matters: Broadcom has positioned itself as one of the primary data center infrastructure vendors for AI, working both on Google’s custom AI chips and providing essential networking components that connect thousands of chips for advanced AI software development.

• In December, the company revealed it was developing custom AI chips with three major cloud customers, further strengthening its position in the AI infrastructure market.

Software expansion: Broadcom’s infrastructure software division, which now includes VMware following its acquisition in Q4 2023, generated $6.7 billion in sales—a 47% increase year-over-year.