Broadcom Inc (NASDAQ:AVGO, ETR:1YD) reported third-quarter earnings that exceeded Wall Street expectations, driven by strong growth in AI-related revenue.
But the chip maker's stock dropped 5% due to concerns over its AI revenue outlook.
The company posted adjusted earnings per share (EPS) of $1.24, surpassing the $1.21 forecast, while revenue hit $13.07 billion, above the expected $12.96 billion.
Revenue increased by 47% year-over-year, bolstered by continued demand for semiconductor solutions and infrastructure software.
Broadcom's CEO, Hock Tan, emphasized the growing importance of AI to the company’s financial performance, projecting fiscal year 2024 AI-related revenue to reach $12 billion.
"Broadcom's third quarter results reflect continued strength in our AI semiconductor solutions and VMware," said Tan. "We expect revenue from AI to be $12 billion for fiscal year 2024, driven by our networking and custom AI accelerators."
Broadcom's Semiconductor Solutions segment generated $7.27 billion in revenue for the third quarter, marking a 5% year-over-year increase. However, this figure fell short of the $7.41 billion that analysts had expected.
In contrast, the Infrastructure Software segment experienced a significant surge, with revenue reaching $5.8 billion. This result not only exceeded the $5.5 billion forecast but also represented a remarkable 200% increase compared to the previous year.
Broadcom’s guidance for the fourth quarter forecasts revenue of approximately $14 billion, slightly below the $14.13 billion consensus, with adjusted EBITDA expected to be around 64% of revenue.
While the company expects $12 billion in AI-related sales for FY2024, some analysts and investors were disappointed by the slower ramp in AI revenue growth.
Shares of Broadcom fell in afterhours trading, down 5.2% from its closing price of $152.82 on Thursday.