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Broadcom raises AI chip revenue outlook, lifting shares by more than 14% premarket

Published 06/12/2024, 04:29 PM
Updated 06/13/2024, 04:40 AM
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Investing.com -- Broadcom upgraded its annual revenue guidance for its artificial intelligence-optimized chips, sending shares in the semiconductor group sharply higher in premarket trading on Thursday.

Revenue from the California-based company's AI-tied chips is now projected to be "over $11 billion," an increase from its prior forecast of roughly $10 billion. Broadcom (NASDAQ:AVGO) stands to be a major benficiary of a boom in enthusiasm around AI because its cutting-edge networking processors, which help move large amounts of data, are used in applications like OpenAI's ChatGPT chatbot.

Sales from the firm's AI products came in at $3.1 billion in the second quarter, up from around $2.3 billion in the preceding three-month period.

Analysts at AllianceBernstein (NYSE:AB) noted that Broadcom's current outlook implies around $5.6 billion in second-half sales from the AI business. The figure, they argued, would be "up only about 4% from $5.4 billion in the first half, and at a [second-half] run-rate of approximately $2.8 [billion per quarter], which would actually be down from the around $3.1 billion seen in the [second quarter]."

Responding to a question in a post-earnings call from these analysts about whether Broadcom was anticipating a conservative growth path for its AI business over the rest of the year, Chief Executive Hock Tan suggested that the company was seeing some "lumpiness" in its quarterly shipments.

But he said it was "the best forecast I have at this point," adding "the general trend trajectory is [...] getting better."

Meanwhile, the company also announced a ten-for-one stock split aimed at making its shares, which have soared by more than 37% so far this year, more affordable for retail investors.

For the second quarter, Broadcom announced adjusted earnings per share (EPS) of $10.96 on revenue of $12.49 billion. Analysts polled by Investing.com had forecast EPS of $10.85 and revenue of $10.85 billion.

Revenue from semiconductor solutions, its core business that houses its custom chips division, rose 6% versus the same period last year to $7.20 billion. Sales at its infrastructure software segment, which includes cloud computing unit VMware, more than doubled to $5.29 billion.

Broadcom also increased its full-year overall revenue forecast by $1 billion to $51 billion. Annual adjusted earnings before interest, taxes, depreciation and amortization are also now seen at 61% of revenue, compared to a prior outlook of 60%.

Yasin Ebrahim contributed to this report.

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