By Dan Gallagher

Broadcom's last earnings report made the chip maker a $1 trillion company. Its latest one should help it reclaim that mantle.

Broadcom helps tech giants like Google design their own processors for artificial-intelligence uses. So it benefits greatly from the many billions of dollars being poured into AI development by those companies.

But that also makes Broadcom a prime target of growing worries by investors about the sustainability of AI spending. These were stoked by new developments like China's DeepSeek and the potential for further restrictions on advanced chip sales to foreign markets like China.

Broadcom has a lot of exposure to other segments of the chip market that aren't faring nearly as well, such as industrial components and radio-frequency chips that go in Apple's iPhone.

Those worries, and the market's brutal downturn over the past couple of weeks, caused Broadcom to lose its $1 trillion crown. Its shares lost 22% over the past month, far outpacing the S&P 500's 6% decline.

The company's fiscal first-quarter results late Thursday should help it recover much of that lost ground -- and its crown.

Broadcom said its AI business generated $4.1 billion in revenue in the quarter ended Feb. 2, up 78% from the same period last year. That easily topped the $3.75 billion analysts were expecting, according to consensus estimates by Visible Alpha. Broadcom also projected $4.4 billion in AI revenue for the current quarter, 9% above Wall Street projections.

Both were stronger beats than those shown by AI chip rival Marvell Technology in its quarterly report Wednesday.

Broadcom announced in its earnings call that it is working with four more "hyperscalers" -- tech giants that operate massive data centers -- on designs for AI accelerator chips. These could add to the three such customers Broadcom already serves.

The market certainly liked that news: Broadcom's shares jumped more than 12% in after-hours trading Thursday.

More big tech customers would ease worries about the volatility of Broadcom's AI business, given the unpredictable swings in quarterly capital spending by tech giants like Google, Amazon and Microsoft. And Broadcom's AI business is getting large enough to offset the weaker areas, such as wireless, which is being impacted by Apple's less-impressive iPhone cycle this year.

Broadcom's AI business made up 50% of its total semiconductor revenue in the just-ended quarter versus 31% a year ago. If investors start warming to AI stocks again, Broadcom should bask in plenty of heat.

Write to Dan Gallagher at dan.gallagher@wsj.com

(END) Dow Jones Newswires

March 06, 2025 19:35 ET (00:35 GMT)

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