Broadcom’s market leadership in AI chips is putting pressure on Nvidia and Marvell, analysts say

Arya forecast fiscal 2025 revenue of $61.1 billion (previously $59.3 billion) and earnings per share of $6.27 (previously $6.00). It expects fiscal 2026 revenue of $70.2 billion (previously $68.5 billion) and earnings per share of $7.50 (previously $7.31).

Its forecast implies a growth trajectory of about 15% revenue and 20% EPS over the next three years on a diversified base of silicon and infrastructure software.

Based on Broadcom’s leading capabilities and IP in cutting-edge logic, networking, storage and interface design, Arya predicted its AI revenue will grow from $12 billion this year to about $30 billion in 2027.

However, Arya noted that average EPS of 30% could move toward $11-$12/share by calendar year 2027, assuming AI revenue instead reaches $53 billion, based on that Broadcom maintains its current 70% stake in a larger SAM valued at $75 billion.

There could be further upside potential, as Broadcom says the reported range only applies to its current three customers’ “line-of-sight” intention to build 1 million units of custom accelerator clusters (XPU) each, with an 80% compute mix and 20% require and networking.

JP Morgan: Broadcom delivered solid quarterly results in the fourth quarter due to continued strong sequential growth in its AI semiconductor segment, offsetting lower software sales.

For the first quarter, Broadcom expected revenue to be in line with consensus expectations and better than market expectations as AI demand remained strong and software sales accelerated.

AI revenue in fiscal year 2024 was $12.2 billion, increasing three-fold compared to the previous year. Sur expects to grow to $17 billion to $18 billion (+40% y/y) in fiscal 2025 as cloud and hyperscaler capital spending continues to be strong and focus on expanding AI infrastructure and the increase in the second half of the year Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) Googles Next generation TPU v6 3nm AI accelerator ASIC.

More importantly, Broadcom expects the AI-SAM opportunity for its three existing cloud/hyperscalers to accelerate, driven by continued significant investments in multi-generation XPU roadmaps and larger cluster sizes.

Even using a more conservative market share assumption, Sur noted that Broadcom’s AI business will grow at a compound annual growth rate (CAGR) of 40-50% over the next few years.

In the near term, Broadcom continues to expect sequential growth in its AI revenues for the first quarter, despite a product transition from the 5nm TPU v6 inference chip to the 3nm TPU v6 training chip.

The 3nm TPU v6 training chip is expected to launch in large volumes in the second half of the next fiscal year, and this SKU, Sur said, can bring Broadcom more than $8 billion in fiscal 2025.

Given the breadth of its portfolio, diversification and product cycles, Broadcom continues to deliver a stable revenue growth profile even amid macroeconomic volatility. Broadcom generated strong free cash flow for the year, which led to an 11% dividend increase.

Sur forecast fiscal 2025 revenue of $62.7 billion and earnings per share of $6.50.

Price promotion: AVGO shares were up 19.7% at $216.20 at last check on Friday.

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