Broadcom stock trades near record levels as AI and networking segment earnings accelerate.
Broadcom Inc. (NASDAQ: AVGO) has seen its stock trade near record territory in 2024, supported by robust demand for custom AI accelerators, high-end networking chips, and software solutions. As of December 16, 2024, shares closed at approximately $1,350, near their then-record high of roughly $1,405 set earlier that month, with the company's market capitalization reaching approximately $560 billion, up 33% from around $420 billion one year earlier.
The company's fiscal 2024 results, released in December 2024, demonstrate the scale of this transformation. Full-year revenue reached approximately $50.4 billion, up roughly 42% from $35.8 billion in fiscal 2023. Within this, semiconductor solutions revenue reached about $35 billion, up approximately 48% from roughly $23.6 billion a year earlier, driven largely by higher AI accelerator and networking shipments as well as the consolidation of VMware-related software revenue.
Profitability expanded meaningfully alongside this revenue growth. Adjusted EBITDA reached close to $30 billion in fiscal 2024, versus roughly $21 billion in fiscal 2023, an increase of about 43% that maintained adjusted EBITDA margins in the high fifty percent range—approximately 59% in both years. The company attributed strong margins to its focus on custom accelerators for hyperscale cloud providers, high-end networking chips for data centers, and recurring infrastructure software maintenance streams.
AI-related revenue emerged as the most significant growth driver. Broadcom disclosed that revenue tied directly to AI data center deployments reached roughly $12 billion in fiscal 2024, up from about $7 billion in fiscal 2023—an increase of around 71%—now representing close to one quarter of total company revenue. The company explained that this AI accelerator business consists of application-specific integrated circuits tailored to hyperscale customers and is expected to benefit from rising parameter counts and larger language models in coming years.
Networking and broadband segments also contributed meaningfully. Fiscal 2024 networking revenue, including Ethernet switching and routing silicon, reached approximately $9 billion, compared with roughly $7 billion in fiscal 2023, an increase of around 29%, driven by migration to 400G and 800G connectivity and the rollout of next-generation spine and leaf switches in cloud data centers.
On the infrastructure software side, now including VMware-branded virtualization and cloud management products, Broadcom reported software revenue of around $15.4 billion in fiscal 2024, up from roughly $12.2 billion in fiscal 2023, an increase of about 26%. The company emphasized that more than 90% of this software revenue is subscription or maintenance-based, contributing to predictable cash flows.
Cash generation supported both debt reduction following the VMware acquisition and substantial shareholder returns. Broadcom generated about $20 billion in free cash flow during fiscal 2024, up from roughly $16 billion in fiscal 2023, an increase of around 25%. The company's board approved a significant dividend increase for fiscal 2025, raising the quarterly dividend to $5.25 per share from $4.10 paid in fiscal 2024—a year-over-year increase of about 28%, or $21.00 on an annualized basis. Applied to Broadcom's market capitalization, this implied a dividend yield of around 1.8% to 2.0%.
Balance sheet metrics have been a primary focus following the VMware transaction. Broadcom indicated that total debt stood at roughly $72 billion immediately after closing the VMware acquisition but had been reduced to about $68 billion by late 2024, supported by fiscal 2024 free cash flow. Gross leverage stood at approximately 2.2 times adjusted EBITDA, trending lower than the roughly 2.5 times level immediately after the deal. Management has outlined guidance for net leverage to trend toward approximately 2.0 times adjusted EBITDA over the medium term.
The company has signaled its intent to return approximately 50% of prior-year free cash flow to shareholders through dividends and repurchases, implying potential annual distributions on the order of $10 billion given recent free cash flow levels. For investors, the investment case rests on the combination of 42% revenue growth to $50.4 billion, adjusted EBITDA of around $30 billion, and free cash flow of about $20 billion, which collectively underpin the higher dividend and support Broadcom's efforts to manage leverage. Broadcom stock's proximity to prior record highs reflects market expectations that AI accelerator and networking demand, along with recurring software subscriptions, will continue to sustain elevated margins and cash flows.