Quiver Quantitative - Broadcom (NASDAQ:AVGO) recently provided a less-than-optimistic forecast for its fiscal fourth quarter, highlighting a persistent lack of enthusiasm in the electronic components sector. The projected revenue of approximately $9.27 billion falls slightly short of Wall Street's average estimate of $9.28 billion. This relatively stagnant outlook for Broadcom is in stark contrast to the industry's surge driven by the artificial intelligence (AI) boom. While the company continues to be a primary supplier for major products like Apple (NASDAQ:AAPL) iPhone, the sales for these devices have seen a decline. The inconsistent expenditure on semiconductors for mega data centers, another of Broadcom's significant markets, further contributes to this slowdown.
Broadcom's CEO, Hock Tan, remains hopeful, anticipating AI-related revenues to surge and soon constitute over a quarter of the company's total sales. He underscored the healthy demand for advanced technologies among leading cloud computing firms, noting their increasing investments in "AI clusters within data centers". However, despite this growth trajectory in AI, the broader downturn in the industry is currently overshadowing such advancements. The company's stock witnessed a decline of over 3% following the release of this quarterly report, although it had previously seen a robust 65% increase in value this year.
Broadcom's diverse product portfolio extends beyond chips; the company has made significant inroads into software tailored for large enterprises. This varied offering makes its performance an indicator of the broader tech expenditure trend. Although the growth pace has reduced from the highs witnessed during the pandemic, the sales in the recent fiscal third quarter were slightly above expectations, with a 4.9% revenue increase to $8.88 billion.
However, when compared to contemporaries like Nvidia (NVDA) which has experienced remarkable sales growth due to an insatiable demand for its AI accelerators, Broadcom's progress seems muted. The latter derives a considerable portion of its revenue from more stagnant markets, including smartphones. While Hock Tan maintains a conservative outlook regarding the chip industry's long-term growth, he had previously mentioned to investors that orders were booked through to October. Furthermore, the company, headquartered in San Jose, California, has ventured into enterprise software, broadening its scope with acquisitions in security and mainframe capacities. Its intended acquisition of VMware (VMW) remains in limbo due to regulatory checks.
This article was originally published on Quiver Quantitative