(Reuters) – Broadcom, a San Jose-based chip company, has forecasted fourth-quarter revenue slightly below Wall Street estimates due to concerns about weak enterprise spending and stiff competition in the networking chip space. This prediction takes into account the potential impact of a boom in artificial intelligence-led demand.
Following this news, the company’s shares fell by 3.4% in extended trading.
Broadcom’s semiconductor business has been affected by soft enterprise demand and a slower-than-expected recovery in consumer electronics markets, such as smartphones. Additionally, the software industry as a whole has suffered due to slashed IT budgets in both the United States and Europe, which has impacted Broadcom’s software portfolio.
Although Broadcom has introduced new networking products to cater to artificial intelligence workloads, it is facing increased competition in the form of Nvidia’s alternative to ethernet chips, InfiniBand, as well as companies like Marvell Technology.
Analyst Kinngai Chan from Summit Insights Group explained that Broadcom’s weak outlook is a result of its exposure to traditional compute servers, which are experiencing feeble demand as they are being overshadowed by AI servers. He also noted that demand in the storage networking and broadband access markets is very mixed.
The chip company expects its current-quarter revenue to be around $9.27 billion, slightly lower than the average analyst expectation of $9.28 billion, according to Refinitiv data. In the third quarter, Broadcom reported revenue of $8.88 billion, slightly exceeding the Refinitiv analyst estimate of $8.86 billion.
Excluding items, Broadcom earned $10.54 per share in the quarter ended July 30, which was higher than the estimated $10.42.
Financial analyst Chavi Mehta in Bengaluru contributed to this report. The article was edited by Krishna Chandra Eluri.
Credit: The Star : Tech Feed
