Broadcom Forecast Disappoints Investors After Nvidia Blowout

Broadcom Inc. gave a fourth-quarter forecast that missed analysts’ estimates, a sign it’s getting a slower payoff from the AI boom than some anticipated.

Revenue will be $34.8 billion in the period, which runs through October, the company said in a statement Wednesday. Though analysts predicted $35.1 billion on average, some estimates topped $36 billion, according to data compiled by Bloomberg.

Broadcom shares fell about 4% in late trading after the report was released. The stock had been up 6.1% this year through the close.

The outlook failed to measure up to a blockbuster forecast delivered by rival Nvidia Corp. last week. Broadcom has been trying to crack that company’s dominance of the AI processor industry by offering custom-made alternatives. Though Broadcom has landed some big customers in that effort, it’s still early in the process.

Nvidia set a “high sales bar,” Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada said in a note. Broadcom is also facing competition from Marvell Technology Inc. and MediaTek Inc., which are both backed by Nvidia.

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AI chip revenue alone will generate $21.7 billion in the fourth quarter, Broadcom said. That narrowly topped the average estimate, with some projections well exceeding $22 billion.

In the fiscal third quarter, which ended Aug. 2, sales rose 86% to $29.6 billion. Analysts had projected about $29.5 billion on average. Earnings climbed to $3.32 a share, excluding some items. That compared with an estimate of $3.23.

AI semiconductor revenue was $16.7 billion in the period, compared with an average estimate of $15.9 billion. That category includes custom-built accelerators — the chips used to develop and run AI models — as well as networking semiconductors.

Broadcom has been riding high on custom AI chip demand, both by signing deals and leading a charge to find a way to help companies like Anthropic PBC pay for pricey semiconductor purchases. Chief Executive Officer Hock Tan has set up financing vehicles with Apollo Global Management Inc. and Blackstone Inc. to help Anthropic pay for the Google chips that Broadcom helped develop.

The financing partnership, which is meant to back more than 20 gigawatts of computing power, will require hundreds of billions of dollars. That level of capacity would roughly equal the output of 20 nuclear plants.

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There also have been signs of mounting competition. Last month, Marvell Technology Inc. announced a deal to help make custom semiconductors for Alphabet Inc.’s Google. Broadcom and Google have long worked together to develop that company’s tensor processing units, or TPUs, which are chips used in AI data centers.