Broadcom gives tepid forecast, missing loftiest expectations

BROADCOM, a chip supplier to companies like Alphabet and Apple, gave a lackluster revenue forecast for the current quarter, suggesting that the AI spending frenzy isn't as strong as some investors anticipated.
Sales will be about US$15.8 billion in the fiscal third quarter, which ends Aug 3, the company said in a statement on Thursday. Though analysts had estimated US$15.7 billion on average, some projections ranged US$1 billion higher than that figure, according to data compiled by Bloomberg.
The outlook signals that investor expectations for Broadcom's AI-fuelled growth run were too aggressive.
Like Nvidia, the company is seen as a key beneficiary of a surge in artificial intelligence spending. Data centre companies rely on its custom chips and networking components to handle AI computing workloads.
Broadcom's stock fell about 2 per cent in extended trading. The shares had earlier closed at US$259.93 in New York, leaving them up 12 per cent this year.
Broadcom shares had climbed more than 30 per cent since the company delivered its previous results in March, bringing its market value to US$1.2 trillion. Much of the gain came in the past month — fuelled by signs that heavy spending on artificial intelligence gear is poised to continue in the coming months.
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That made it hard for Broadcom to impress investors, even with numbers that generally topped estimates.
In the second quarter, which ended May 4, sales rose 20 per cent to US$15 billion. Profit, excluding some items, was US$1.58 a share. Analysts had estimated revenue of about US$15 billion and earnings of US$1.56 a share.
Chief executive officer Hock Tan said AI-related revenue grew 46 per cent to US$4.4 billion in the period, driven by demand for networking equipment. Sales from AI will total US$5.1 billion in the current period, he said. Analysts estimated US$4.79 billion, with some projections as high as US$5.29 billion.
Broadcom investors have focused lately on its custom design business, which is benefiting from sales to clients who want components to run AI workloads.
The company also makes switch chips to direct traffic between the pricey graphics processors that train and run AI models. The chipmaker just began shipping the latest version of its Tomahawk switch, which it said can replace six of the previous version.
Broadcom also makes connectivity components for the iPhone and sells virtualization software for running networks.
Tan has built one of the most valuable companies in the chip industry through a string of acquisitions. He also has assembled a software unit that's now approaching the scale of Broadcom's semiconductor operations. That reach makes the company's forecasts a bellwether for demand over a broad swath of the technology industry. BLOOMBERG

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