Broadcom’s Q1 revenue beats estimates as AI powers demand

SAN FRANCISCO: Tech conglomerate Broadcom beat market estimates for first-quarter revenue on Thursday (March 7), as cloud providers continue to upgrade data centers to support artificial intelligence, helping drive demand for its advanced networking chips.

Smaller rival Marvell Technology’s stock slumped 10% after it forecast revenue below market expectations, hurt by weak demand for its custom chips used in artificial intelligence applications.

Broadcom did not update its annual revenue forecast of US$50 billion (RM234.9 billion), which still falls just shy of expectations, likely disappointing investors.

Broadcom’s recently high-flying stock dipped more than 5% in after-hours trading.

Broadcom and Marvell sell technology providing fast communication between high-end computers, and the two have been viewed on Wall Street as big potential winners from the explosive growth in AI computing.

Ahead of their reports, Broadcom and Marvell each rallied over 4% in Thursday’s trading session, both hitting record highs after surging in recent months.

A generative AI push across the tech landscape has prompted firms to increase spending on infrastructure, pushing demand for Broadcom’s chips which allow different parts of large cloud companies' systems to communicate with one another.

Complex data centres, which are involved in the development of generative AI, are obsolete without networking gear from providers such as Broadcom to support it. This has successfully embedded Broadcom in supply chains, making it one of the larger beneficiaries of AI.

While widely known as a chipmaker, Broadcom's portfolio has now widened to include various tech firms such as VMware and software company CA technologies.

Revenue from its semiconductor solutions segment ticked up 4% to US$7.39 billion for the first quarter, shy of the Visible Alpha estimates of US$7.45 billion. Infrastructure software revenue grew 153% to US$4.57 billion, which was ahead of estimates of US$4.49 billion.

The company reported quarterly net revenue of US$11.96 billion.

Broadcom reported adjusted first-quarter net income of US$5.25 billion, compared with analysts’ estimates of US$5.01 billion. Adjusted for stock compensation, among other things, earnings were US$10.99 a share, compared with estimates of US$10.30 a share. – Reuters