Broadcom Inc., a major chip supplier for tech giants like Apple Inc., faced a decline in its stock price after issuing a disappointing sales forecast due to slower growth in its non-artificial intelligence (AI) related business segments.
The company announced that sales for the fiscal fourth quarter are expected to reach approximately $14 billion, falling short of analysts’ projections of $14.1 billion. This indicates that Broadcom’s non-AI operations are not expanding as quickly as anticipated, despite the company’s success in the AI sector. While Broadcom has benefited from the increasing demand for AI technologies, its other divisions, which include mainframe products, security software, mobile phone chips, and data storage solutions, are not experiencing the same level of growth.
Following the announcement, Broadcom’s shares dropped by about 6% in after-hours trading, with the stock closing at $152.82 in regular New York trading. Despite this setback, the company remains up 37% for the year.
Broadcom expects to generate $12 billion in revenue from AI-related products for the full year, surpassing analysts’ average estimate of $11.8 billion. CEO Hock Tan noted that while the non-AI chip businesses have faced challenges, some markets have started to show signs of recovery with sequential revenue growth and a 20% increase in bookings. Tan expressed optimism about the potential for these markets to return to previous levels of performance.
In the third quarter, Broadcom reported a profit of $1.24 per share, exceeding analysts’ expectations of $1.22. Revenue rose to $13.07 billion, slightly above the projected $13.03 billion. The company’s semiconductor division recorded revenue of $7.27 billion, while software sales reached $5.8 billion. Tan remains confident in the strength of the AI market for the upcoming year.
Under Tan’s leadership, Broadcom has become a key player in the chip industry through strategic acquisitions and a focus on dominant businesses in specific sectors. The company has also expanded into software offerings to diversify its portfolio. Broadcom’s involvement in the AI sector has been beneficial, with the company providing components and software for AI accelerators used in various applications.
Broadcom’s products are essential for data center providers, automakers, smartphone manufacturers, and networking equipment suppliers. The company’s software solutions cater to mainframe computers, cybersecurity, and data center optimization. Additionally, Broadcom supplies key components for Apple’s iPhone, highlighting its strong relationship with the tech giant.
As Broadcom continues to navigate the evolving tech landscape, the company remains focused on leveraging its strengths in AI and other key areas to drive growth and innovation in the semiconductor industry.
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