- Broadcom forecasted Q4 revenue slightly below expectations, citing weak broadband demand despite strong AI chip sales. Shares fell nearly 5%.
- Broadcom reported a $1.88 billion loss, including a $4.5 billion tax charge from an IP transfer.
OUR TAKE
Broadcom’s lower-than-expected revenue forecast and stock drop highlight the challenge of meeting sky-high investor expectations, especially when balancing different segments. The company’s robust AI chip demand contrasts sharply with the steep declines in broadband and non-AI networking revenue, revealing the volatility in tech sectors beyond AI. Investors may need to temper their enthusiasm, recognising that even leading chipmakers can’t escape broader market fluctuations. This scenario underscores the pressure on tech firms to not only drive innovation but also manage diverse revenue streams effectively.
-Tacy Ding, BTW reporter
What happened
Chipmaker Broadcom (AVGO.O) forecasted fourth-quarter revenue slightly below Wall Street expectations on Thursday, impacted by sluggish spending in its broadband segment.
Despite a sharp rise in demand for its artificial intelligence chips, shares dropped nearly 5% in after-hours trading.
California-based Broadcom anticipates revenue of approximately $14 billion, while analysts polled by LSEG had forecast $14.04 billion.
“We believe it’s unreasonable for investors to expect Broadcom to deliver Nvidia-level results and outlook,” said Kinngai Chan, senior research analyst at Summit Insights.
During a post-earnings conference call, Broadcom executives revealed that broadband revenue dropped by 49% in the reported quarter, while non-AI networking declined by 41%. This suggests that strong performance in the AI segments was counterbalanced by weak demand in other divisions.
The increase in its AI revenue forecast “clearly shows Broadcom is also benefiting from the industry’s AI adoption, albeit less robustly compared to Nvidia,” Chan added.
Also read: OpenAI talks new AI chip with Broadcom
Also read: Broadcom soars on AI chip demand and stock split
Why it’s important
Investor expectations for companies linked to artificial intelligence remain extremely high, as they are banking on AI chips and technology to fuel substantial growth.
However, AI chip leader Nvidia’s quarterly forecast fell short of lofty investor hopes last week, unable to sustain its record of consistently surpassing Wall Street targets.
Broadcom reported a loss of $1.88 billion on a GAAP basis, compared to a profit of $3.30 billion in the same period last year.
The net loss includes a one-time discrete non-cash tax charge of $4.5 billion, stemming from the intra-group transfer of certain intellectual property rights to the United States as part of a supply chain realignment.
The company raised its forecast for annual AI revenue to $12 billion, up from its previous expectation of $11 billion, benefiting from strong demand for its custom chips and AI networking equipment.
