Broadcom Inc. (NASDAQ: AVGO) saw its shares decline by 6% in after-hours trading following its Q2 2024 earnings report. Despite beating revenue and earnings estimates, investors reacted cautiously due to concerns over near-term growth in some segments. However, analysts remain optimistic about the company’s long-term prospects, driven by strong demand in AI, networking, and enterprise software.
Q2 2024 Earnings Highlights
| Metric | Q2 2024 Results | Analyst Estimates | YoY Change |
|---|---|---|---|
| Revenue | $12.49B | $12.03B | +43% |
| Adjusted EPS | $10.96 | $10.84 | +6% |
| Networking Sales | $3.88B | $3.72B | +44% |
| Semiconductor Solutions | $7.39B | $7.20B | +6% |
| Free Cash Flow | $4.73B | $4.50B | +12% |
Source: Broadcom Q2 2024 Earnings Report
Key Takeaways:
- Revenue surged 43% YoY, largely due to the VMware acquisition and strong AI-related demand.
- Networking segment (AI chips & custom silicon) grew 44% YoY, driven by hyperscaler investments.
- Semiconductor revenue growth slowed to 6%, reflecting cyclical weakness in enterprise storage and broadband.
- Free cash flow remains strong at $4.73B, supporting dividend payouts and M&A strategy.
Why Did Broadcom Shares Drop?
Despite strong earnings, the 6% dip in Broadcom’s stock can be attributed to:
- Slower Growth in Semiconductor Segment – While AI and networking performed well, traditional semiconductor demand (especially in broadband and storage) softened.
- VMware Integration Concerns – Investors are monitoring whether Broadcom can successfully streamline VMware’s operations without losing customers.
- Market-Wide Tech Selloff – Some profit-taking occurred after Broadcom’s 80% surge over the past year.
Long-Term Growth Drivers Remain Intact
1. AI & Networking Boom
- Broadcom is a key supplier of AI accelerators, custom ASICs, and networking chips for hyperscalers like Google, Microsoft, and Meta.
- AI-related revenue expected to exceed $10B in 2024, up from $4B in 2023.
2. VMware Synergies
- The $61B VMware acquisition (closed in late 2023) is expected to boost software revenue and margins.
- Broadcom plans to cut costs and focus on high-value enterprise customers, improving profitability.
3. Strong Free Cash Flow & Shareholder Returns
- Broadcom has a track record of increasing dividends (now at $5.25 per share quarterly).
- Stock buybacks and disciplined M&A strategy support long-term EPS growth.
Analyst Price Targets & Recommendations
| Firm | Rating | Price Target | Upside Potential |
|---|---|---|---|
| Morgan Stanley | Overweight | $1,500 | +15% |
| Goldman Sachs | Buy | $1,550 | +18% |
| Barclays | Overweight | $1,450 | +11% |
| JP Morgan | Neutral | $1,300 | -0.5% |
Data as of latest analyst updates
Consensus:
- Most analysts remain bullish, citing AI growth and VMware synergies.
- Short-term volatility expected, but long-term upside remains strong.
Conclusion: A Buying Opportunity?
While Broadcom’s stock dipped post-earnings, the long-term outlook remains robust. The company is well-positioned in AI infrastructure, cloud networking, and enterprise software, making it a strong pick for growth investors.
For those with a long-term horizon, this pullback could be an attractive entry point before the next wave of AI-driven demand.
Further Reading:
What do you think? Is Broadcom a buy after this dip? Let us know in the comments!
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please conduct your own research before investing.