Analysts defend Broadcom as annual guidance falls short after FQ4 earnings beat

December 7, 2023 4:33 PM EST
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Price: $1,309.13 +0.98%

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(Updated - December 8, 2023 5:39 AM EST) - Broadcom reported better-than-expected fourth-quarter results, but the chipmaker's guidance for annual revenue missed Wall Street estimates.

Broadcom Inc (NASDAQ: AVGO) was up 0.7% in pre-market Friday trade following the report.

Broadcom reported Q4 adjusted EPS of $11.06 on revenue of $9.30B. Analysts polled by anticipated EPS of $10.96 on revenue of $9.28B.

The beat on the bottom line was "driven by investments in accelerators and network connectivity for AI by hyperscalers," the company said.

Semiconductor solutions, its core business, rose 3% to $7.33B, while infrastructure software added 7%% to $2.00 billion.

Following the finalization of the VMware acquisition, the company hiked up its quarterly dividend by 14% to $5.25.

Looking ahead, fiscal 2024 revenue guidance was $50B, missing expectations of $50.25B. Broadcom said VMware will contribute $12 billion for 11 months of FY24.

"The deal might make things a little messy for a while as Broadcom works through integration and synergy capture (the company suggested >40% of the cost base will come out on a runrate basis by year-end, and will be selling off some non-core parts of the business)," Bernstein analyst Stacy Ragnan, who lifted the price target to $1,150 per share, said.

"However, the VMware strategy appears build not only around taking out cost, but also to drive growth (primarily through increasing share-of-wallet)."

BofA analyst Vivek Arya reiterated a Buy rating on AVGO stock due to a "unique combo od product cycles, FCF generation/returns."

Additional reporting by Senad Karaahmetovic

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