Broadcom (AVGO) reported mixed fiscal fourth-quarter results Thursday, coming up slightly short on the top line, despite strong profitability. The forward guidance was complicated by a number of moving parts and cyclical challenges in the semiconductor business — but we’re unconcerned because the company’s AI story remains intact, along with the ongoing integration of a key cloud-computing company. Revenue for the three months ended October 29 increased 4% year-over-year, to $9.3 billion, missing analysts’ forecasts of $9.41 billion, according to LSEG. Earnings-per-share (EPS) on the basis of non-generally accepted accounting principles (GAAP) climbed 6% on an annual basis, to $11.06, exceeding analysts’ expectations of $10.45-per-share, LSEG data showed. Adjusted Earnings before interest, taxes, depreciation and amortization (EBITDA) of $6.05 billion also beat out the $5.97 billion Wall Street predicted. Shares of Broadcom were roughly flat in post-market trading, at around $920 per share, after climbing 2% in Thursday’s session. Bottom line It wasn’t a clean quarter for the semiconductor-and-software firm, and some investors may point fingers at the lack of revenue upside. But there’s enough in this quarter to believe the thesis is progressing. The way we look at Broadcom is simple. Its networking business is surging right now thanks to spending on artificial intelligence, and management sees demand for its AI accelerator increasing. Meanwhile, we think the market is underestimating what Broadcom can do with its acquisition of cloud software-vendor VMware . Beyond revenue and profit, VMware reduces the cyclicality of Broadcom’s entire business – which now has more of a 50-50 semiconductor-to-software split. When Broadcom announced this massive software deal in May 2022, management’s target was to increase VMware’s earnings before interest, taxes, depreciation and amortization (EBITDA) to a run-rate of $8.5 billion in three years, from $4.7 billion in…
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