Key Takeaways
- Broadcom revenue forecast falls short of Wall Street estimates.
- The chipmaker beat expectations for the July quarter on revenue and profit.
- Shares dropped in after-hours trading despite the strong results.
Broadcom gave investors a fourth-quarter revenue forecast below Wall Street estimates, sending shares lower even after the chipmaker posted strong quarterly results. The Broadcom revenue forecast of about $34.8 billion fell short of analysts’ expectations of roughly $35 billion.
Broadcom Revenue Forecast Falls Short Despite a Solid Quarter
The Broadcom revenue forecast is below the roughly $35 billion average estimate from analysts. Analysts had predicted roughly $35 billion on average, and some estimates topped $36 billion.
The company’s actual third-quarter numbers beat expectations. Revenue grew 86% from a year earlier to reach $29.6 billion, ahead of the $29.45 billion analysts predicted. Adjusted earnings came in at $3.32 per share, topping the $3.23 estimate.
AI chip sales drove much of that growth. Broadcom’s AI semiconductor revenue more than tripled to $16.7 billion for the quarter, marking a 221% jump from a year earlier. CEO Hock Tan said demand for the company’s custom AI accelerators and networking products remains very strong.
Shares still fell as much as 4% in after-hours trading on Wednesday before paring some losses. The stock closed the regular session down about 0.7% at $367.24. Despite Wednesday’s beat, Broadcom shares have gained only around 6% this year, trailing rival Nvidia’s roughly 20% gain.
Investors Wanted a Bigger Beat
Analysts pointed to the size of Broadcom’s outperformance as the real issue, not the underlying business. StoneX equity research analyst Cody Acree said the margin of the beat felt thin for a company so closely tied to AI spending.
He noted that when a stock carries such high growth expectations, a modest beat-and-raise quarter can still disappoint the market. Investors had priced in results dramatically better than consensus, given how far AI-linked stocks have climbed this year.
The forecast miss follows a blowout quarter from Nvidia, which set a high bar for chipmakers this earnings season. That contrast likely sharpened investor scrutiny of Broadcom’s smaller-than-hoped-for beat.
Broadcom did offer one bright spot. The company forecast fourth-quarter AI chip sales of about $21.7 billion, slightly above the $21.33 billion analysts expected. That suggests the AI chip business itself remains on track, even as overall revenue guidance disappointed.
Competition in Custom Chips Intensifies
Broadcom’s custom-chip unit, which designs specialized AI processors for large technology companies, faces a more crowded field than it did a year ago. Major cloud providers are increasingly looking beyond Nvidia’s dominant AI chips and exploring custom silicon from multiple suppliers.
Rival chipmaker Marvell recently struck a custom-chip agreement with Google that could generate up to $120 billion in revenue through fiscal 2033. The deal could also make Google one of Marvell’s largest investors, with a stake worth as much as $12.2 billion.
That competition raises questions about whether Broadcom can keep growing at its current pace as hyperscalers diversify their chip suppliers. The results still show its AI business expanding quickly, but the market reaction suggests investors expect that growth to accelerate, not simply continue.
Broadcom’s next quarterly report will show whether the current forecast holds up, and whether competition from rivals like Marvell shows up more clearly in its numbers. For now, Wednesday’s reaction signals that strong growth alone may no longer satisfy investors who expect Broadcom to beat already high expectations consistently.
