Broadcom forecasts quarterly sales below estimates amid rising custom AI chip competition

BROADCOM forecast quarterly revenue below Wall Street estimates on Wednesday (Sep 2), signalling intense competition could hamper gains from its custom processors.

Shares of the Palo Alto, California-based company fell over 3 per cent in extended trading. They have gained about 6 per cent this year, significantly underperforming rivals and the broader semiconductor index.

While Broadcom is a key player in the chip sector, it lags behind AI bellwether Nvidia, whose dominant graphics processors remain the industry standard for AI workloads.

The company expects fourth-quarter revenue of about US$34.8 billion, compared with analysts’ average estimate of US$35.03 billion, according to data compiled by LSEG.

Finance chief Amie Thuener said the company expects to maintain its adjusted operating margin at 66 per cent for the fourth quarter, flat from a year ago.

Broadcom also said it expects AI chip sales of US$21.7 billion in the fourth quarter, slightly above estimates of US$21.33 billion, according to analysts polled by Visible Alpha.

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The company’s customers are also signing deals with rival firms. Last month, Marvell struck a custom chip deal with Google that could make the search giant one of its biggest investors with an up to US$12.2 billion stake.

In April, Broadcom signed a long-term agreement to supply Google with future generations of custom AI chips through 2031.

Broadcom’s ability to meet explosive AI demand has also been tested by a strained supply chain.

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To reduce its reliance on any single manufacturer, the company in July signed a multi-year memorandum of understanding with Samsung Electronics, worth over US$200 billion.

AI chip sales more than tripled to US$16.7 billion in the third quarter, lifting Broadcom’s total revenue to US$29.59 billion, which beat estimates of US$29.36 billion. Adjusted profit came in at US$3.32 per share, compared with estimates of US$3.24. REUTERS