By Harshita Mary Varghese and Max A. Cherney
June 5, 2025
Reuters
June 5 (Reuters) – Broadcom (AVGO.O), forecast third-quarter revenue above Wall Street estimates on Thursday, betting on strong demand for its networking and custom AI computing chips.
However, the company’s shares fell 4% in extended trading, after gaining about 12% this year, as the forecast failed to impress investors who have bet heavily on chip stocks, anticipating substantial growth driven by advancements in generative AI technology.
Broadcom forecast third-quarter revenue of around $15.80 billion, compared with analysts’ average estimate of $15.71 billion, according to data compiled by LSEG.
“Clearly, expectations were high coming into the print with the stock rising almost 30% in the past month,” said Kinngai Chan, senior research analyst at Summit Insights Group.
Broadcom, a key player in the AI hardware ecosystem, helps design custom processors that are highly specialized integrated circuits designed for AI and cloud computing companies such as OpenAI and Google (GOOGL.O).
The Palo Alto, California-based company has begun shipping its latest networking chip, the Tomahawk 6, designed to accelerate AI workloads. The networking chip doubles the performance from its predecessor and significantly improves the efficiency of bits flying across data center networks.
“We expect growth in AI semiconductor revenue to accelerate to $5.1 billion in Q3, delivering ten consecutive quarters of growth, as our hyperscale partners continue to invest,” Broadcom CEO Hock Tan said.
Non-AI semiconductor revenue is close to the bottom and has been relatively slow to recover, Tan said on a post-earnings call.
Revenue from Broadcom’s semiconductor segment, which supplies products for data centers and networking, rose 16.7% to $8.41 billion in the second quarter.
The company reported quarterly revenue of $15 billion, compared with estimates of $14.99 billion.