Key Points
- Broadcom forecasts Q4 revenue of $14 billion, slightly below analyst expectations of $14.04 billion.
- Broadband revenue declined 49%, and non-AI networking fell 41%, impacting overall results despite AI segment growth.
- The company reported a net loss of $1.88 billion, influenced by a $4.5 billion tax provision related to IP transfer for supply chain realignment.
- Broadcom raised its annual AI revenue forecast to $12 billion, benefiting from increased demand for custom chips and AI networking gear.
Chipmaker Broadcom has projected fourth-quarter revenue slightly below Wall Street expectations, citing weaker spending in its broadband segment. The California-based company forecasted revenue of approximately $14 billion, just shy of the $14.04 billion anticipated by analysts polled by LSEG. Following the announcement, Broadcom’s shares fell nearly 5% in extended trading, reflecting investor concerns.
Broadcom reported a significant decline in its broadband and non-AI networking divisions, with revenues falling by 49% and 41% in the reported quarter. Despite robust growth in AI-related segments, these declines underscored the challenges in other parts of the business. The company posted a net loss of $1.88 billion on a GAAP basis, starkly contrasting the $3.30 billion profit recorded a year ago. The loss included a one-time discrete non-cash tax provision of $4.5 billion, stemming from an intra-group transfer of intellectual property rights to the United States as part of a supply chain realignment.
Investor expectations for AI-linked companies remain high, driven by the belief that AI chips and technology will fuel substantial growth. Broadcom, which has seen a surge in demand for its AI chips and networking equipment, raised its annual AI revenue forecast to $12 billion, up from the previous projection of $11 billion. This increase highlights Broadcom’s growing role in the AI market. However, it is not expected to achieve the same results as AI-chip leader Nvidia, whose recent forecast also fell short of lofty investor expectations.
Despite challenges in broadband and networking, Broadcom exceeded analyst expectations for third-quarter revenue and adjusted profit and increased its full-year revenue forecast to $51.5 billion from $51 billion. The company’s custom chips, used for managing large volumes of data, have seen heightened demand as companies seek to optimize their data operations.
Broadcom’s infrastructure software revenue tripled in the third quarter, largely due to contributions from VMware, signaling that its expansion into enterprise software is yielding positive results.
