Why AI Stock Broadcom Crushed It in June

Key Points

• Although the chipmaker's latest quarterly results only beat analyst estimates modestly, they featured impressive growth figures.

• Meanwhile, the company rolled out a new product and was the subject of numerous bullish prognosticator updates.

With a nearly 14% share price gain in June, Broadcom (NASDAQ: AVGO) was a clear stock market winner during the month. The initial boost came from the company's impressive fiscal second-quarter 2025 results, which were reported near the start of June, and were subsequently compounded by an important product launch and a series of positive analyst takes on the stock.

Setting a new quarterly record

During that period, Broadcom managed to grow its revenue by a robust 20% year over year to just over $15 billion -- a new quarterly record for the chipmaker. Better, its non-GAAP (adjusted) net income soared 44% higher to nearly $7.8 billion, or $1.58 per share.

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Although expectations were fairly high, with consensus analyst estimates sitting just below those figures, at $14.95 billion for revenue and $1.57 for per-share adjusted net income, investors ultimately traded up Broadcom stock on the news.

There were other reasons to be satisfied, after all. Broadcom's rather sparse guidance called for roughly $15.8 billion in revenue for its current (third) quarter; like the trailing results, this is slightly ahead of the average pundit projection ($15.77 billion).

Much of Broadcom's growth comes from its position as a prominent supplier of chips for artificial intelligence (AI) functionalities. This continues to be a white-hot segment of the tech industry, and the company said its AI-related revenue rose 46% in the second quarter to more than $4.4 billion. More growth is in store, most likely, as Broadcom forecasts this to rise to $5.1 billion in the third quarter.

Accordingly, the company has clearly prioritized the segment. Also, in June, it launched the Tomahawk 6 switch, a product designed to handle the comparatively more intense resource requirements of AI. This specialized hardware manages data traffic flowing through a network. We don't yet have a solid indication of how the initial takeup of the Tomahawk was, but it's sure to have been strong.

Banking on a bright future

The rise of AI is relentless and unstoppable, so it's no surprise that Broadcom is a favored stock among investors and analysts alike. Some in the latter group of individuals were busy in June working up new takes on the company following that earnings report, and for the most part, these analyses were bullish.

One of the more hopeful ones came from HSBC. The bank's Frank Lee upgraded his Broadcom recommendation from hold to buy and, in the process, more than doubled its price target to $400 per share from $240. Lee cited Broadcom's strength in the application-specific integrated circuit (ASIC) category, an important one for (again) AI, as a key factor in his move.

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HSBC Holdings is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom and HSBC Holdings. The Motley Fool has a disclosure policy.