Broadcom forecasts third-quarter revenue above estimates on AI boost

By Tiyashi Datta

(Reuters) – Broadcom (NASDAQ:) Inc forecast third-quarter revenue above market estimates on Thursday, as it benefits from massive corporate investments in AI-related technologies.

The viral success of ChatGPT has sparked a surge in orders for chips that underpin the technology at big data centers, driving a rally in shares of semiconductor companies that cater to the hottest slice of the market.

Broadcom Chief Executive Hock Tan said generative AI could account for more than 25% of the company’s semiconductor revenue in 2024.

“Our revenue today, from this opportunity, represents about 15% of our semiconductor business,” Tan said, adding that it was only 10% in fiscal 2022.

Broadcom supplies chips used in data centers for networking and specialized chips that speed up AI work. It released a new chip for wiring together supercomputers for AI work using networking technology in April.

Shares of the San Jose, California-based company were last down nearly 2% in choppy trading after the bell.

“We believe investors are disappointed with the company’s outlook as expectations were ratcheted up after the strong outlook provided by Nvidia (NASDAQ:),” Summit Insights Group analyst Kinngai Chan said.

Nvidia Corp in May forecast second-quarter revenue more than 50% above Wall Street estimates, and said it was boosting supplies to meet surging demand for its AI chips.

Broadcom forecast current-quarter revenue of about $8.85 billion, while analysts polled by Refinitiv are expecting revenue of $8.72 billion.

Revenue in the second quarter rose 8% to $8.73 billion, compared with the estimates of $8.71 billion.

On an adjusted basis, the company earned $10.32 per share, compared with the estimates of $10.08 per share.