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Broadcom (AVGO +19%) is surging to a new all-time high following its Q4 (Oct) results/guidance last night. The semiconductor giant reported fairly modest EPS upside. Revenue grew 51.2% yr/yr, or +11% excluding its VMWare acquisition, to $14.05 bln, which was generally in-line. The company also guided to Q1 (Jan) revs of approximately $14.6 bln, which was slight upside. For good measure, Broadcom also boosted its quarterly dividend by 11% $0.59/sh.

• Chip segment revenue in Q4 grew a healthy 12% yr/yr and 13% sequentially to $8.2 bln. Not surprisingly, the AI side of its chip business is booming with AI revenue up 150% yr/yr to $3.7 bln. On the other hand, its non-AI semiconductor revenue declined by 23% yr/yr to $4.5 bln. The silver lining here is that the non-AI side is recovering, it's up 10% from the bottom six months ago and should improve to down mid-teens in Q1.
• Breaking it down by end market, Q4 Networking revenue grew 45% yr/yr to $4.5 bln with AI networking revs jumping 158% yr/yr and accounting for 76% of networking revs. This was driven by a doubling of its AI XPU shipments to three hyperscale customers and 4x growth in AI connectivity revenue. Looking ahead, its next generation XPUs are in 3 nanometers and will be the first of its kind. Broadcom is on track for volume shipments at hyperscale customers in 2HFY25.
• Its next biggest chip segment is Wireless. A seasonal launch by a North American customer (presumably Apple) drove Q4 wireless revenue to $2.2 bln, up 30% sequentially due to higher content. Perhaps in response to recent news reports of Apple (AAPL) seeking to replace Broadcom with its own chips, Broadcom said on the call that it continues to be very engaged with this customer in multi-year road maps across various technologies, including RF, Wi-Fi, Bluetooth, sensing and touch. There have also been recent news reports the two are working together on AI chips.
• Turning on to server storage, its business has recovered 20% from its bottom six months ago to reach $992 mln in Q4. Broadband reached a bottom at $465 mln, down 51% yr/yr. Broadcom has seen significant broadband orders across multiple service providers and now expects Broadband to show recovery beginning in Q1. Finally, Industrial accounts for just 1% of revs, Broadcom expects a recovery in the second half 2025.
• What really stood out were comments in terms of how it sees its semiconductor business evolving over the next three years. Broadcom sees its opportunity in AI is "massive." Broadcom currently has three hyperscale customers who have developed their own multigenerational AI XPU road map. In 2027, Broadcom believes each of them plans to deploy 1 mln XPU clusters across a single fabric. This represents an AI revenue serviceable addressable market for XPUs and network in the range of $60-90 bln in FY27 alone. Broadcom sees itself as very well positioned to achieve a leading market share in this opportunity.

Overall, the Q4 results and guidance were decent. Investors also probably liked the dividend hike. But we think Broadcom's comments about its AI segment and especially its roadmap over the next three years is what it really driving the shares higher today. Basically, Broadcom sees its opportunity in AI as massive. We also think the positive comments about working together with a major wireless company, presumably Apple, are helping the stock as well.