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On Friday, KeyBanc Capital Markets adjusted its outlook on Broadcom Limited (NASDAQ:AVGO), increasing the price target to $275 from the previous $260 while maintaining an Overweight rating. The revision follows Broadcom’s announcement of robust financial performance for the first quarter of 2025 and an optimistic guidance for the second quarter. With a market capitalization of $844 billion, Broadcom currently trades at premium multiples according to InvestingPro data, reflecting high market expectations for its AI initiatives.
Broadcom reported significant year-over-year growth in AI revenues, which reached $4.1 billion, surpassing the expected $3.8 billion. This increase was largely attributed to stronger networking revenues. For the second quarter, the company forecasts AI revenues to continue this strong performance, projecting $4.4 billion, marking a 44% year-over-year growth. This aligns with the company’s impressive overall revenue growth of 44% over the last twelve months to $51.6 billion, as reported by InvestingPro, which maintains a "GOOD" Financial Health rating for the company.
The company also revealed the addition of two new AI "engagement partners," expanding its total to four significant collaborations. While not all partners were disclosed, it is believed that two of them include Apple (NASDAQ:AAPL) and OpenAI. These new partnerships are expected to be incremental to Broadcom’s existing financial serviceable available market (SAM), which is valued between $60 billion and $90 billion and is primarily driven by key customers such as Google (NASDAQ:GOOGL), Meta (NASDAQ:META), and Byte Dance. The company maintains a healthy balance sheet with a moderate debt level and strong cash flow generation, according to InvestingPro’s comprehensive analysis, which includes over 30 additional financial metrics and insights available to subscribers.
KeyBanc analyst John Vinh expressed optimism about Broadcom’s position as a leading custom AI ASIC provider, prompted by the company’s strong results. In light of these developments, KeyBanc has raised its estimates for Broadcom’s financial performance along with the price target to $275. The firm’s confidence in Broadcom is underpinned by the company’s solid quarterly outcomes and the anticipated sustained demand in the AI revenue segment. Analyst consensus remains highly bullish, with targets ranging from $181 to $300, reflecting the market’s positive outlook on Broadcom’s AI-driven growth strategy.
In other recent news, Broadcom Inc. reported impressive financial results for the first quarter of fiscal year 2025, exceeding Wall Street expectations. The company’s earnings per share reached $1.60, surpassing the forecasted $1.51, while revenue climbed to $14.92 billion, outpacing the anticipated $14.62 billion. Broadcom’s AI revenue saw a significant increase, hitting $4.1 billion, a 77% rise year-over-year. The company has provided an optimistic revenue outlook for Q2 2025, projecting $14.9 billion. Analysts from various firms have taken note of Broadcom’s strong position in the AI market, with some highlighting the company’s strategic focus on AI semiconductor technology. Despite the positive financial performance, Broadcom faces potential challenges, including supply chain disruptions and macroeconomic pressures. The company remains focused on innovation, as emphasized by CEO Hock Tan, who highlighted Broadcom’s competitive edge in hardware. These developments reflect Broadcom’s continued investment in AI infrastructure and its strategic direction in the tech industry.
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