Broadcom, a leading chipmaker, announced it expects to generate $12 billion in revenue from artificial intelligence (AI) parts and custom chips in fiscal 2024. This updated forecast, up from a previous estimate of $11 billion, reflects the growing demand for AI-related technology.
Despite surpassing Wall Street expectations for third-quarter earnings and revenue, Broadcom’s shares fell 7% in extended trading due to slightly lower-than-expected guidance for the upcoming quarter.
For the third quarter ending on August 4, Broadcom reported revenue of $13.07 billion, exceeding the $12.97 billion anticipated by analysts. Adjusted earnings per share also beat estimates, coming in at $1.24 compared to the forecasted $1.20. However, the company posted a net loss of $1.88 billion, or 40 cents per share, due to a one-time tax provision related to the transfer of intellectual property within the company. This compares to a net income of $6.12 billion in the same period last year.
CEO Hock Tan emphasized the continued strength of Broadcom’s AI semiconductor solutions and VMware, which contributed to the company’s positive performance. Semiconductor sales reached $7.27 billion, a 5% increase from the previous year, while the infrastructure software segment, bolstered by VMware, generated $5.8 billion in sales. The acquisition of VMware, completed in November, has further diversified Broadcom’s business beyond hardware into software solutions.
Despite its robust AI segment, Broadcom faces challenges in other areas, particularly broadband and non-AI networking, both of which saw revenue declines. As a result, Broadcom’s guidance for the fourth quarter forecasts revenue of $14 billion, slightly below analysts’ expectations of $14.04 billion.
Broadcom’s stock, which has risen 75% over the past year due to its role in AI infrastructure, slipped 6.4% in after-hours trading following the announcement. Analysts note that while Broadcom benefits from the AI boom, investor expectations remain high, with comparisons often made to AI-chip leader Nvidia.
The company’s AI-related products, such as custom chips used in major data centers, continue to see strong demand, driven by the industry’s increasing adoption of AI technologies. Broadcom also raised its full-year revenue forecast to $51.5 billion, up from $51 billion previously, signaling confidence in its growth trajectory as AI continues to reshape the semiconductor landscape.
With input from CNBC, Reuters, and Market Watch.
