By Robbie Whelan
Broadcom reported rapid revenue growth on Thursday as demand continues to rise for chips to fill data centers that power artificial-intelligence models.
But shares fell in after-market trading as analysts raised questions about the company's sales forecasts, contracts backlog and anticipated future margins.
Broadcom, which specializes in designing custom AI accelerator chips for companies like Google, OpenAI and Meta, as well as other networking, storage and memory chips essential to advanced computing, posted a profit of $8.518 billion, or $1.74 a share, in the fiscal fourth quarter that ended in early November, compared with $4.3 billion and 90 cents a year earlier.
Sales were $18.02 billion for the quarter, a record, and $63.9 billion for the full fiscal year, better than analyst estimates of $17.5 billion and $63.3 billion, respectively.
In a statement accompanying the release, Broadcom Chief Executive Hock Tan attributed the revenue growth primarily to sales of AI chips. The company projected $8.2 billion in AI revenue for its first quarter, a considerable jump from the consensus forecast of $6.9 billion.
Shares of Broadcom rose more than 2% after-hours, then abruptly fell about 5% as executives went into more detail on a conference call with analysts. Tan noted that the company's fast-growing AI revenue has lower gross margins than its non-AI revenue. Its forecast for non-AI revenue in the first quarter was flat.
Broadcom has largely shrugged off the correction that began in late October and erased hundreds of billions in market value from tech stocks amid worries that a bubble is building in AI. Shares in Oracle fell more than 10% Thursday after the company, in its own earnings presentation, painted a picture of capital expenditures on data centers outrunning revenues for several quarters to come.
More optimistic analysts expect the company's book of business to only grow. By the end of the decade, custom AI chips, as opposed to the more general-use processors like the GPUs designed by Nvidia and Advanced Micro Devices, could represent between 25% and 30% of the whole accelerated computing market, according to Futurum Group, up from just a fraction today.
Many top industry executives expect the entire AI chips market to grow to around $1 trillion a year in the next few years. Broadcom, which designs the custom chips made by Google, known as tensor processing units, or TPUs, is positioned to control 70% to 80% of that custom chip market, said Daniel Newman, Futurum's CEO.
"People used to talk about how software was going to eat the world, but now semiconductors are eating the world, and Broadcom has really just mastered the class of custom silicon for AI," Newman said. "This market is only going to get bigger, and all these AI companies are only going to need more chips."
Write to Robbie Whelan at robbie.whelan@wsj.com |
