Broadcom's multi-cloud services provider, VMware, is projected to achieve sales exceeding $16 billion this year. This optimistic forecast is primarily driven by the introduction of its new artificial intelligence foundation platform, which is expected to provide additional upside potential, as highlighted by Oppenheimer in a recent analysis. VMware’s AI foundation platform, developed in collaboration with Nvidia, has now secured 39 enterprise customers, as revealed by Broadcom Chief Executive Hock Tan during a recent conference call discussing the outcomes of its fiscal first-quarter results.
This technological leap underscores VMware's commitment to integrating cutting-edge AI solutions, setting the stage for impressive future growth. In the latest fiscal quarter, Broadcom reported earnings that surpassed analysts’ expectations, showcasing a significant portion of this success attributed to advancements in AI and the performance of VMware.
Tan commented that the robust demand for the company’s AI semiconductor solutions and infrastructure software businesses has contributed to a record revenue generation and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Notably, VMware plays a vital role in the infrastructure software segment, signifying its importance in Broadcom's overall strategy. Broadcom's sales outlook for the current quarter stands at an impressive $14.9 billion, exceeding consensus estimates and reflecting a 19% increase compared to the previous year.
Within this forecast, infrastructure software is expected to contribute around $6.5 billion, reinforcing the company's growth trajectory. Tan also emphasized VMware's resilience: "VMware has proven extremely sticky due to depth/breadth of integrations with legacy operating systems—some decades old." This loyalty among customers highlights VMware's adaptability and the critical role of its integrated solutions in enterprise environments. Following the positive performance in the first quarter, Oppenheimer has reaffirmed its outperform rating on Broadcom's stock, maintaining a price target of $225.
However, the brokerage mentioned that gross margins might experience slight softening in the latter half of the current fiscal year, which is an important consideration for investors. Furthermore, Oppenheimer has adjusted its earnings per share (EPS) estimates for Broadcom for the calendar years 2025 and 2026, raising them to $6.76 and $7.99, respectively, up from previous estimates of $6.42 and $7.21, indicating strong confidence in the company’s growing profitability. Current stock price: $184.91, Change: +$5.46, Percent Change: +3.04..