Broadcom posted $22.2 billion in revenue for its second fiscal quarter, narrowly below analysts' consensus of $22.3 billion. Adjusted earnings per share came in at $2.44, beating the $2.40 consensus.
On an annual basis the company showed robust expansion: revenue rose 48% year over year, and net income increased 88% to $9.31 billion.
AI demand remains the main growth driver
Demand for custom AI chips continues to drive Broadcom's growth. The company helps major technology firms develop their own chip architectures, including Google, Anthropic, Meta and OpenAI. CEO Hock Tan said Broadcom currently has six key AI-chip customers, which form the backbone of the company’s growth.
AI-related revenue more than doubled year over year to $10.8 billion in the quarter. Management expects AI revenue of $16 billion in the current quarter.
Segment results and forward guidance
Broadcom guided to roughly $29.4 billion in revenue for the upcoming quarter, above the Wall Street consensus of $28.5 billion. The semiconductor segment generated $15.1 billion in revenue, exceeding expectations, while the infrastructure software segment delivered $7.18 billion, up 9% year over year but short of analyst estimates.
Why investors were disappointed
The investor disappointment stemmed less from any slowdown in AI business than from subdued messaging relative to highly elevated market expectations. CEO Hock Tan did not raise Broadcom’s previously stated target of more than $100 billion in AI-chip revenue by 2026, a stance that weighed on sentiment.
Following the earnings release, Broadcom shares fell about 11% in after-hours trading. For context, the stock has risen nearly 40% so far this year and has increased almost ninefold since the end of 2022, leaving investor expectations very high.
The information in this article is based on reporting by CNBC. This article does not constitute investment advice or a recommendation.
