Broadcom Shares Tumble as Revenue Forecast Falls Short of AI-Driven Expectations

Broadcom shares slump as revenue target fails to impress investors counting on AI boost

The drop in Broadcom's shares stems from "the lack of upside in estimates .. and outlook in AI revenue ... along with lackluster semiconductor segment revenue," said CFRA Research analyst Angelo Zino. While the company increased its sales forecast for AI chips by $1 billion for the fiscal year ending October to $12 billion, the boost was in line with widespread expectations, Zino said. The selloff in Broadcom's shares wiped out more than $73 billion off its market value at the close of the market. Artificial intelligence-linked chips are still a bright spot for Broadcom, as Big Tech invests in the datacenter infrastructure necessary to move around the hoards of data used by AI models. However, Broadcom's custom AI chip business could see lumpy growth due to its dependence on a limited number of customers spending large amounts of capital. Broadcom does not name its three custom AI chip clients, but is reported to be behind Alphabet's TPU chips employed in the tech giant's datacenters. Morgan Stanley analysts said Broadcom's AI revenue could be uneven, though it noted still-strong growth this year. The company's AI chip revenue is expected to rise 10% sequentially to over $3.5 billion in the current quarter. The company's shares were valued at around 26 times forward earnings expectations compared to about 30 for AI chip giant Nvidia. Other chip stocks such as Nvidia, Advanced Micro Devices and Micron Tech were relatively flat. Revenue from Broadcom's semiconductor segment, which supplies products for data centers and networking, grew 5% year-on-year in the quarter ending July, but just 1% from the previous quarter. The drop in Broadcom's stock adds to cooling market enthusiasm for artificial intelligence, even as Big Tech continues to invest in AI development. Nvidia shares - a barometer for the AI rally - lost more than 7% last week while Broadcom dropped about 2% as Nvidia's lackluster forecast sparked a selloff. Broadcom also reported a surprise net loss of $1.88 billion, ending an almost eight-year streak of recording a net profit, according to LSEG data. Analysts had estimated a net profit of $2.88 billion. The unexpected loss could be attributed to the company relocating some of its intellectual property back to the United States, resulting in a huge tax hit, said Daiwa analyst Louis Miscioscia. (Reporting by Akash Sriram, Arsheeya Bajwa and Zaheer Kachwala in Bengaluru; Editing by Krishna Chandra Eluri and Maju Samuel)

Broadcom shares slump as revenue target disappoints investors hoping for big AI boost

Broadcom posted big declines in revenues from its broadband and non-AI networking divisions on Thursday, while a hike in its forecast for AI chip sales failed to impress growth-hungry investors who have driven a more than 35% increase in its shares so far this year.Broadcom's shares slid more than 7% in early trading on Friday, after the chipmaker's tepid revenue forecast spooked investors betting on robust demand for AI chips to drive strong growth. Chipmakers are bearing the brunt of Wall Street's lofty expectations after a months-long rally in the shares of semiconductor firms, as investors bet heavily on the hardware that supports generative AI technology. Broadcom posted big declines in revenues from its broadband and non-AI networking divisions on Thursday, while a hike in its forecast for AI chip sales failed to impress growth-hungry investors who have driven a more than 35% increase in its shares so far this year. The drop in Broadcom's shares stems from "the lack of upside in estimates... and outlook in AI revenue... along with lackluster semiconductor segment revenue," said CFRA Research analyst Angelo Zino. While the company increased its sales forecast for AI chips by $1 billion for the fiscal year ending October to $12 billion, the boost was in line with widespread expectations, Zino said. Broadcom is set to lose more than $54 billion in market value, if losses hold. Artificial intelligence-linked chips are still a bright spot for Broadcom, as Big Tech invests in the datacenter infrastructure necessary to move around the hoards of data used by AI models. However, Broadcom's custom AI chip business could see lumpy growth due to its dependence on a limited number of customers spending large amounts of capital. Broadcom does not name its three custom AI chip clients, but is reported to be behind Alphabet's TPU chips employed in the tech giant's datacenters. Morgan Stanley analysts said Broadcom's AI revenue could be uneven, though it noted still-strong growth this year. The company's AI chip revenue is expected to rise 10% sequentially to over $3.5 billion in the current quarter. The company's shares were valued at around 26 times forward earnings expectations compared to about 30 for AI chip giant Nvidia. Other chip stocks such as Nvidia, Advanced Micro Devices and Micron Tech were relatively flat. Revenue from Broadcom's semiconductor segment, which supplies products for data centers and networking, grew 5% year-on-year in the quarter ending July, but just 1% from the previous quarter. The drop in Broadcom's stock adds to cooling market enthusiasm for artificial intelligence, even as Big Tech continues to invest in AI development. Nvidia shares - a barometer for the AI rally - lost more than 7% last week while Broadcom dropped about 2% as Nvidia's lackluster forecast sparked a selloff.

Broadcom shares slump as revenue target disappoints investors hoping for big AI boost

Artificial intelligence-linked chips have been a bright spot for Broadcom, as data centers and Big Tech firms invest in infrastructure that can move around the hoards of data used by AI models. However, analysts said Broadcom's AI chip business could see uneven growth due to a limited number of customers spending large amounts of capital. Morgan Stanley analysts said AI revenue could be uneven, though it noted still-strong growth this year. The company's shares were valued at 25.6 times forward earnings expectations compared to 29.6 for AI chip giant Nvidia and 36.07 for AI networking equipment maker Arista Networks. Broadcom's market capitalization, should the losses persist, could drop by about $63 billion from $711 billion as of Thursday's close. Other chip stocks such as Nvidia, Advanced Micro Devices and storage chip maker Micron Tech were down between 1% and 2% before the bell. Revenue from Broadcom's semiconductor solutions business, which supplies products for data centers, networking and broadband, grew 5% in the quarter ending July from the same time a year ago, but just 1% from the previous quarter. Investor enthusiasm for artificial intelligence has cooled even as Big Tech and chip companies continue to bet on the promise of AI and invest in infrastructure to support its development. Broadcom has indicated it continues to benefit from the billions of dollars in AI spending, as it increased its sales forecast for AI chips by $1 billion for the fiscal year ending October to $12 billion. "While we think the AI business deserves a premium, the remainder of Broadcom's business remains the same slow growth high cash flow business that's always been Broadcom's business model," Wolfe Research analyst Chris Caso said. Big Tech firms such as Alphabet's Google and Microsoft have vowed to continue spending on AI as they try to generate revenue off their AI tools through subscriptions and higher-priced tiers of their software. (Reporting by Akash Sriram in Bengaluru; Editing by Krishna Chandra Eluri)

Broadcom shares slump as revenue target disappoints investors hoping for big AI boost

(Reuters) - Broadcom's shares slid about 9% in premarket trading on Friday, after the chipmaker's revenue forecast spooked investors betting on robust demand for AI chips to drive strong growth. The chip major posted big declines in revenues from its broadband and non-AI networking divisions on Thursday, offsetting a hike in its forecast for AI chip sales. Artificial intelligence-linked chips have been a bright spot for Broadcom, as data centers and Big Tech firms invest in infrastructure that can move around the hoards of data used by AI models. However, analysts said Broadcom's AI chip business could see uneven growth due to a limited number of customers spending large amounts of capital. Morgan Stanley analysts said AI revenue could be uneven, though it noted still-strong growth this year. The company's shares were valued at 25.6 times forward earnings expectations compared to 29.6 for AI chip giant Nvidia and 36.07 for AI networking equipment maker Arista Networks. Broadcom's market capitalization, should the losses persist, could drop by about $63 billion from $711 billion as of Thursday's close. Other chip stocks such as Nvidia, Advanced Micro Devices and storage chip maker Micron Tech were down between 1% and 2% before the bell. Revenue from Broadcom's semiconductor solutions business, which supplies products for data centers, networking and broadband, grew 5% in the quarter ending July from the same time a year ago, but just 1% from the previous quarter. BOOST FROM AI BOOM Investor enthusiasm for artificial intelligence has cooled even as Big Tech and chip companies continue to bet on the promise of AI and invest in infrastructure to support its development. Broadcom has indicated it continues to benefit from the billions of dollars in AI spending, as it increased its sales forecast for AI chips by $1 billion for the fiscal year ending October to $12 billion. "While we think the AI business deserves a premium, the remainder of Broadcom's business remains the same slow growth high cash flow business that's always been Broadcom's business model," Wolfe Research analyst Chris Caso said. Big Tech firms such as Alphabet's Google and Microsoft have vowed to continue spending on AI as they try to generate revenue off their AI tools through subscriptions and higher-priced tiers of their software. (Reporting by Akash Sriram in Bengaluru; Editing by Krishna Chandra Eluri)

Broadcom's Stock Drops 10% as Its Non-AI Business Struggles: An Earnings Report Deep Dive | The Motley Fool

In fiscal Q3, the chipmaker continued to experience strong demand for its products for artificial intelligence (AI) data centers. Shares of Broadcom (AVGO -10.36%) dropped 10.4% on Friday, following the semiconductor and infrastructure software maker's release on the prior afternoon of its report for the third quarter of fiscal 2024 (ended Aug. 4). The decline was likely largely driven by guidance for fourth-quarter revenue being a bit lower than Wall Street had expected. In the current environment for artificial intelligence (AI) stocks that have run up considerably, simply meeting or slightly beating Wall Street's estimates is often not enough to protect against a post-earnings release decline. These companies must often post results and issue guidance notably higher than Wall Street projections to satisfy investors. Some investors might have also been dissatisfied with Broadcom's Q3 results. Both the top and bottom lines beat the analyst consensus estimates -- but only by a little. In addition, broader market dynamics likely played a smaller role in Broadcom stock's decline. Major indexes got clobbered on Friday due to a weaker-than-expected jobs report for August. Data source: Broadcom. YOY = year over year. GAAP = generally accepted accounting principles. Fiscal Q3 2024 ended Aug. 4. Broadcom's revenue growth was driven nearly entirely by its acquisition of VMware in November 2023. Excluding the contribution from this acquisition, revenue grew just 4% year over year. In general, investors should focus mainly on the adjusted numbers for operating and net income, which exclude one-time items. That said, GAAP numbers should also get attention. The GAAP net loss "included a one-time discrete non-cash tax provision of $4.5 billion from the impact of an intra-group transfer of certain IP [intellectual property] rights to the United States as a result of supply chain realignment," the company said. Wall Street was looking for adjusted EPS of $1.22 on revenue of $12.98 billion, so Broadcom slightly surpassed both expectations. In the quarter, Broadcom generated cash of $4.96 billion running its operations, up 5% from the year-ago period. It generated free cash flow (FCF) of $4.79 billion, or 37% of revenue, up 4% year over year. FCF excluding restructuring and the integration of VMware was $5.3 billion, up 14% year over year. The company ended the quarter with cash and cash equivalents of $10 billion, up 1% from the prior quarter, and long-term debt of $66.8 billion. Broadcom did not explicitly state how much total revenue it generated from AI-related products. On the earnings call, CEO Hock Tan said that "we expect, in Q4, AI revenue to grow sequentially 10% to over $3.5 billion." So, we can deduce that Q3 AI revenue was roughly $3.1 billion to $3.2 billion. That equates to about 24% of total revenue. Data source: Broadcom. YOY = year over year. The infrastructure software segment's growth was entirely or nearly entirely driven by the VMware acquisition, according to metrics management provided on the earnings call. VMware's focus was on virtualization and cloud services. On the earnings call, Tan provided the following data on the semiconductor segment: For the fiscal fourth quarter (which ends Nov. 3), management expects: Going into the report, Wall Street had been modeling for Q4 revenue of $14.11 billion, so the company's revenue outlook fell a bit short of the expectation. For the year, Broadcom now expects revenue from AI products to be $12 billion, up from its prior outlook of more than $11 billion. In short, Broadcom's revenue growth is being entirely driven by demand for its AI products, namely its Ethernet networking products and custom chips that accelerate AI workload processing. Its non-AI business continues to struggle, though some parts of this business seem to have bottomed out and begun rebounding. Moreover, Broadcom's revenue growth was nearly entirely driven by the contribution from its VMware acquisition. Organic growth was only 4% year over year.

Broadcom forecasts lukewarm quarterly revenue despite AI chip surge, shares fall

The Irvine, California-based company expects revenue of around $14 billion, while analysts polled by LSEG expected $14.04 billion. Investor expectations for artificial intelligence-linked companies remain very high as they bet on AI chips and technology to drive significant growth. Broadcom reported third-quarter revenue of $13.07 billion, beating estimates of $12.97 billion, according to LSEG data. However, the company posted a loss of $1.88 billion on a GAAP basis, compared with a profit of $3.30 billion a year ago. The net loss includes a one-time discrete non-cash tax provision of $4.5 billion, resulting from an 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 earlier expectation of $11 billion, as it benefits from strong demand for its custom chips. Broadcom's custom chips, which are used to move around large quantities of data, have seen increased orders from companies looking to streamline their data operations. The company's revenue in the third quarter for its semiconductor solutions segment, which houses its networking and custom chips, came in at $7.27 billion, while analysts expected $7.39 billion. AI-chip leader Nvidia's quarterly forecast fell short of sky-high investor expectations last week, failing to maintain its history of comfortably beating Wall Street targets. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid)

Broadcom forecasts lukewarm quarterly revenue despite AI chip surge, shares fall

Chipmaker Broadcom forecast fourth-quarter revenue slightly below Wall Street expectations on Thursday, hurt by sluggish spending in its broadband segment. Despite a sharp rise in orders for its artificial intelligence chips, shares fell nearly 5% in extended trading. California-based Broadcom expects revenue of around $14 billion, while analysts polled by LSEG expected $14.04 billion. "We believe it's unreasonable for investors to expect Broadcom to post Nvidia-type results and outlook," Kinngai Chan, senior research analyst at Summit Insights, said. Investor expectations for artificial intelligence-linked companies remain very high as they bet on AI chips and technology to drive significant growth. However, AI-chip leader Nvidia's quarterly forecast fell short of sky-high investor expectations last week, failing to maintain its history of comfortably beating Wall Street targets. On a post-earnings conference call, Broadcom executives reported that broadband revenue declined 49% in the reported quarter, while non-AI networking fell 41%, indicating a strong performance in the AI segments was offset by weak demand in other divisions. Broadcom posted a loss of $1.88 billion on a GAAP basis, compared with a profit of $3.30 billion a year ago. The net loss includes a one-time discrete non-cash tax provision of $4.5 billion, resulting from an 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 earlier expectation of $11 billion, as it benefits from the demand for its custom chips and AI networking equipment. It also beat analyst expectations for third-quarter revenue and adjusted profit. The rise in its AI revenue forecast "clearly shows Broadcom is also benefiting from the industry AI adoption albeit less robustly compared to Nvidia," Chan added. Broadcom's custom chips, which are used to move around large quantities of data, have seen increased orders from companies looking to streamline their data operations. It also raised its full-year revenue forecast to $51.5 billion from its prior expectation of $51 billion. The company's infrastructure software revenue tripled in the third quarter, primarily due to VMware's contribution, indicating its push into enterprise software was paying off. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid)

Broadcom raises annual AI revenue estimate on demand for custom chips

Shares of the Irvine, California-based company fell more than 3% in extended trading. The net loss includes a one-time discrete non-cash tax provision of $4.5 billion, resulting from an intra-group transfer of certain intellectual property rights to the United States as part of a supply chain realignment. Its third-quarter revenue came in at $13.07 billion, beating estimates of $12.97 billion, according to LSEG data. The company expects AI revenue to be $12 billion for the year, up from its earlier expectation of $11 billion. Broadcom's custom chips, which are used to move around large quantities of data, have seen increased orders from companies looking to streamline their data operations. The company has benefited from the AI boom, which has driven demand for significant processing capacity with the emergence of applications like OpenAI's ChatGPT. The company does face stiff competition from Nvidia's InfiniBand technology which rivals its own ethernet switch chip, Jericho3-AI. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid)

Broadcom raises annual AI revenue estimate on demand for custom chips

(Reuters) -Chipmaker Broadcom raised its forecast for fiscal 2024 artificial intelligence revenue, citing higher demand for networking equipment and growing orders for its custom chips business. However, the company reported a loss of $1.88 billion in the quarter on a GAAP basis, compared with a profit of $3.30 billion a year ago. Shares of the Irvine, California-based company fell more than 3% in extended trading. The net loss includes a one-time discrete non-cash tax provision of $4.5 billion, resulting from an intra-group transfer of certain intellectual property rights to the United States as part of a supply chain realignment. Its third-quarter revenue came in at $13.07 billion, beating estimates of $12.97 billion, according to LSEG data. The company expects AI revenue to be $12 billion for the year, up from its earlier expectation of $11 billion. Broadcom's custom chips, which are used to move around large quantities of data, have seen increased orders from companies looking to streamline their data operations. The company has benefited from the AI boom, which has driven demand for significant processing capacity with the emergence of applications like OpenAI's ChatGPT. The company does face stiff competition from Nvidia's InfiniBand technology which rivals its own ethernet switch chip, Jericho3-AI. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid)

A semiconductor maker expects to make $12 billion from AI this year

Nvidia stock is navigating one of its most turbulent weeks ever Broadcom chief Hock Tan said in a statement accompanying third-quarter earnings that the company expects "revenue from AI to be $12 billion for fiscal year 2024 driven by Ethernet networking and custom accelerators for AI data centers." The Palto Alto, California-based company reported $13 billion in revenue for the third quarter, bringing in an adjusted $1.24 a share, narrowly beating analysts' expectations. Broadcom said Thursday that it expects sales of approximately $14 billion for the fourth quarter, following below of the $14.09 billion expected by analysts, according to data compiled by FactSet. Shares of Broadcom fell 7.37% in pre-market trading Friday, to $141.55. Its stock is up more than 40% so far this year. Its November 2023 acquisition of cloud computing VMWare has also helped drive this fiscal year's results, Broadcom said. Despite falling short of Wall Street's estimates, Broadcom's fourth-quarter results are expected to be 51% higher than the same period last year. Companies tied to the AI boom, from chipmakers to cloud computing and data center providers, have fallen under the microscope -- especially during earnings season. When investors perceive a cautious outlook from these companies, they often begin to wring their hands. Nvidia, the chipmaker that has become a multi-trillion dollar company seemingly overnight, reported record second-quarter revenue of $30 billion for fiscal year 2025 last week. That was up 122% from a year ago. Yet, its shares still fell in after-hours trading after coming short on guidance expectations. Smaller earnings beats and more tepid guidance are all seen as red flags in the tech space, where so much is hinging on the blowout success of these major companies that are going all-in on AI. Although much smaller (Broadcom has a market cap of $711 billion), Broadcom is an important player in the AI world, as it supplies chips to Apple and other big tech players.

Broadcom says it will sell $12 billion in AI parts and custom chips this year

Broadcom reported third fiscal quarter results on Thursday that beat Wall Street expectations for revenue and earnings. Broadcom shares fell 5% in extended trading. Here's how the chipmaking conglomerate did versus LSEG consensus estimates for the quarter ending Aug. 4: Broadcom expects current-quarter revenue of $14 billion, versus $1.36 per share on $14.04 billion expected. Broadcom reported a net loss of $1.88 billion, or a loss of forty cents per share, versus net income in the year-ago quarter of $6.12 billion, or $1.24 per share. The company said the net loss for the third quarter includes a one-time tax provision of $4.5 billion related to trading intellectual property rights from one company segment to another based in the U.S. as part of supply chain management. Broadcom stock is up 75% in the past year as investors have come to appreciate that the company produces several parts that are required for big data centers or can be used to create infrastructure for artificial intelligence. For example, Broadcom works on Google's TPU chip, which Apple used to train some of its AI features. Broadcom CEO Hock Tan said in a statement that the company expects to record $12 billion in sales from AI parts and custom chips in fiscal 2024. "Broadcom's third quarter results reflect continued strength in our AI semiconductor solutions and VMware," Tan said in a statement. The company reported $7.27 billion in semiconductor sales during the quarter, up 5% annually. It's still larger than Broadcom's infrastructure software segment, which reported $5.8 billion in sales, much of which is from the company's VMware acquisition.

Live news: Broadcom sales outlook underwhelms investors despite AI upgrade

US chipmaker Broadcom published current quarter sales guidance that fell slightly below analysts' expectations, mirroring disappointment felt by investors last week when Nvidia's revenue outlook came up short. The company expects $14bn in revenue in the current quarter, slightly lower than Wall Street estimates, according to Reuters data. Sales in the previous quarter and adjusted earnings exceeded expectations. Broadcom shares fell about 5 per cent in extended trading, even as it raised its guidance for AI revenue to $12bn for the fiscal year. Last quarter, the company said AI revenue would exceed $11bn in that period. The results followed Nvidia, which last week saw its shares tumble despite a strong quarter as it failed to meet the highest expectations of investors watching for any sign of a slowdown in off-scale demand for AI chips.

Broadcom lifts annual AI revenue outlook after Q3 results beat estimates By Investing.com

Investing.com - Broadcom on Thursday lifted its guidance on annual artificial intelligence revenue after reporting third-quarter results that beat analysts' forecasts supported by strength in an AI-product revenue and strong performance from VMWare. The company said it expects revenue from AI to be $12B for fiscal year 2024 from a prior guidance of $11B. Broadcom announced adjusted earnings per share of $1.24 on revenue of $13.07 billion. Analysts polled by Investing.com anticipated EPS of $1.21 on revenue of $12.97B. "Broadcom's third quarter results reflect continued strength in our AI semiconductor solutions and VMware (NYSE:VMW)," the company said. Looking ahead, the company expects fiscal Q4 revenue of about $14B and adjusted EBITDA of approximately 64% of projected revenue.