Source: Davit Kirakosyan
Broadcom (NASDAQ:AVGO) shares experienced a significant drop of over 9% during today’s trading session. This decline was prompted by the chipmaker’s fourth-quarter revenue forecast falling slightly short of market expectations. The company anticipates sales of $14 billion in the upcoming quarter, just below the $14.04 billion predicted by analysts.
In the third quarter, Broadcom outperformed expectations, reporting adjusted earnings per share of $1.24 on revenue of $13.07 billion, surpassing the forecasted $1.21 EPS and $12.97 billion in revenue. Despite this positive outcome, the broadband division faced challenges, with revenue in this sector plunging by 49% in Q3. CEO Hock Tan attributed this decline to reduced spending from telecommunications and service providers. Broadband sales are expected to drop over 40% year-over-year in the fourth quarter, with a recovery projected for 2025.
In contrast, Broadcom’s AI-optimized chips saw a surge in demand. The company lifted its full-year sales forecast for AI components to $12 billion, up from the previous estimate of over $11 billion. AI revenue reached approximately $3.1 billion in Q3, aligning with expectations. While specific guidance for AI revenue in fiscal 2025 was not provided, Tan expressed confidence in sustained strong demand for AI.
In summary, despite challenges in the broadband sector, Broadcom’s thriving AI business is driving optimism for future growth. With a strong outlook for AI and potential broadband recovery in 2025, Broadcom remains positioned for success in the semiconductor market.