Broadcom shares dropped in after-hours trading Tuesday after the company reported fiscal second-quarter results that came in just below Wall Street's revenue expectations, and CEO Hock Tan declined to raise the company's full-year AI chip sales forecast.
According to CNBC, Broadcom reported revenue of $22.19 billion for the quarter, slightly below the $22.27 billion analysts had expected. Earnings per share came in at $2.44 adjusted, beating the $2.40 estimate. Net income rose 88% to $9.31 billion compared to the same quarter a year earlier.
Investors had hoped Tan would lift the company's forecast for AI semiconductor revenue, which currently stands at $100 billion for the full fiscal year. He did not. "We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion," Tan said on an earnings call with analysts.
Despite the near-term disappointment, Broadcom's overall numbers showed strong growth. Revenue climbed 48% from $15 billion in the same quarter a year earlier, driven largely by demand for custom AI chips, including Google's tensor processing unit. AI revenue more than doubled on an annual basis to $10.8 billion. Tan said the company expected AI revenue to reach $16 billion in the current quarter, which would represent a tripling from the prior quarter.
Broadcom has six core custom chip customers, Tan said, including Anthropic, Google, Meta, and OpenAI. In December, Tan announced that Anthropic had placed an order for $10 billion in AI chips. The company helps technology firms design their own custom chips, providing intellectual property and other essential technologies those chips require.
Tan also disclosed a shift in what Broadcom will sell to its customers. The company will now offer chips only, rather than the complete integrated AI systems it had previously said it would provide. He offered some explanation for why large orders have not yet translated into immediate deliveries. "The bookings that are coming are not for immediate delivery," Tan said. "Some they hope to have, but the reality they all accept is they need to align quite a few other things in place before they can deliver."
Semiconductor solutions, which covers AI accelerators, networking components, and Wi-Fi chips, generated $15.1 billion in revenue for the quarter, above the $14.72 billion estimate from StreetAccount.
Broadcom shares had been up close to 40% for the year as of Wednesday's close, outpacing the Nasdaq's 16% gain over the same period. The stock has risen nearly ninefold since the end of 2022, when the release of ChatGPT set off the generative AI investment wave. The company projected revenue of approximately $29.4 billion for the current quarter, above the $28.53 billion Wall Street had expected.
