Broadcom disappointed investors with quarterly results that fell just short of expectations. Although the chip and software supplier posted strong revenue and profit growth thanks to continued demand for AI solutions, its stock lost more than 13 percent in after-hours trading.
The company generated revenue of $22.19 billion in the past quarter, a 48 percent increase compared to a year earlier. However, analysts had expected slightly more. This marks the first time since late 2024 that Broadcom has missed Wall Street’s revenue expectations, according to SiliconANGLE.
Bottom line, earnings improved significantly. Net income rose from $4.96 billion to $9.31 billion. Adjusted earnings per share also came in slightly above market expectations.
Once again, the strong growth stems primarily from AI-related activities. Broadcom develops technology and intellectual property that enables large technology companies to design their own AI processors. In doing so, the company is capitalizing on the desire of cloud and AI providers to reduce their dependence on Nvidia.
During a conference call to discuss the results, CEO Hock Tan said that Broadcom now supports six major clients in the development of custom chips. Among them are OpenAI, Anthropic, Google, and Meta Platforms.
Revenue from AI products totaled $10.8 billion, more than double the figure for the same period last year. For the current quarter, Broadcom expects this segment to grow further to approximately $16 billion.
No Higher Forecast
It was precisely these AI activities that caused unease among investors. While the market had anticipated an increase in long-term expectations for AI revenue, Broadcom stuck to its previously issued forecast. The company still expects revenue from AI semiconductors to eventually exceed $100 billion, but did not present a higher target.
For the current quarter, Broadcom forecasts revenue of approximately $29.4 billion. That is above analysts’ average expectations, but proved insufficient to allay concerns.
In addition to chips, Broadcom also provides infrastructure software, a business that expanded significantly with the acquisition of VMware. That division posted revenue of $7.18 billion, a 9 percent increase year-over-year. Here, too, however, the results fell slightly short of market expectations.
According to analysts, the reaction from investors shows just how high the bar has become for companies benefiting from the AI market. Despite record revenue and a doubling of profits, a minor setback appears to be enough to wipe out a significant portion of the company’s market value.