New Delhi

Broadcom Inc. has released its financial results for the third quarter of fiscal year 2024, showcasing a remarkable 47 per cent increase in revenue, which reached $13.07 billion. However, the semiconductor giant also reported a significant net loss of $1.88 billion, primarily due to acquisition-related costs associated with its integration of VMware, acquired in November 2023 as detailed in a CNBC report. 

Revenue growth is driven by AI and software solutions

The report further stated that the revenue growth was bolstered by strong demand for Broadcom's semiconductor solutions, particularly in the artificial intelligence (AI) sector. The company’s President and CEO, Hock Tan, highlighted that the AI semiconductor solutions are projected to generate $12 billion in revenue for the fiscal year 2024. This growth is supported by advancements in Ethernet networking and custom AI accelerators designed for data centres.

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Broadcom's semiconductor solutions segment reported revenues of $7.27 billion, a 5 per cent increase year-over-year. Meanwhile, the infrastructure software segment saw an impressive 200 per cent surge in revenue, reaching $5.8 billion, largely attributed to the ongoing integration of VMware. This integration has not only expanded Broadcom's product offerings but has also significantly enhanced its market presence in the software domain.

Future guidance by Broadcom

Despite the substantial revenue increase, Broadcom's net loss of $1.88 billion, or $0.40 per share, starkly contrasts with the $3.3 billion profit reported in the same quarter last year. This loss was largely influenced by $1.5 billion in amortisation of acquisition-related intangible assets and other restructuring costs. However, on a non-GAAP basis i.e., Generally Accepted Accounting Principles basis, which excludes these one-time costs, Broadcom's earnings per share stood at $1.24, surpassing analysts' expectations of $1.20 per share.

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Looking ahead, Broadcom has provided guidance for the fourth quarter of fiscal year 2024, projecting revenues of approximately $14 billion, which would represent a 51 per cent increase compared to the previous year. The company anticipates an adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin of around 64 percent of projected revenue, indicating a strong operational performance as it continues to integrate VMware and expand its AI capabilities.

Market reaction and investor sentiment

Following the earnings announcement, Broadcom's stock experienced a decline of over 6 per cent in after-hours trading, reflecting investor concerns regarding the net loss and the impact of integration costs on future profitability. Despite this, the company's stock has risen approximately 40 per cent since the beginning of the year, outperforming the broader market.

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As investors digest the latest results, the focus will be on how effectively Broadcom can manage its integration of VMware and leverage its strengths in the AI sector to drive future growth. The ongoing demand for AI solutions presents a significant opportunity for Broadcom, and how the company navigates these challenges will be crucial for its stock performance in the coming quarters.

Therefore, while Broadcom's third quarter 2024 results highlight impressive revenue growth, the significant net loss raises questions about the sustainability of its current trajectory. Investors will be keenly observing the company's performance in the fourth quarter as it aims to capitalise on the growing AI market and solidify its position within the technology sector.