Broadcom late Thursday narrowly beat Wall Street's targets for its fiscal second quarter and with its guidance. But Broadcom stock slipped in extended trading.
The fabless chipmaker and infrastructure software provider earned an adjusted $1.58 a share on sales of $15 billion in the quarter ended May 4. Analysts polled by FactSet had expected Broadcom to earn $1.57 a share on sales of $14.96 billion. On a year-over-year basis, Broadcom earnings increased 44% while sales climbed 20%.
For the current quarter ending Aug. 3, Broadcom forecast revenue of $15.8 billion, up 21% year over year. Wall Street was modeling $15.75 billion in sales in the fiscal third quarter.
Broadcom is the market-share leader in application-specific integrated circuits, or ASICs, for artificial intelligence applications in data centers. It currently provides custom AI chips to Alphabet unit Google, Facebook parent Meta Platforms and TikTok parent ByteDance.
In addition to ASICs, Broadcom makes networking and wireless connectivity products and owns virtualization software firm VMware.
Broadcom saw "continued momentum in AI semiconductor solutions and VMware" in the second quarter, Chief Executive Hock Tan said in a news release.
AI revenue grew 46% from the year-earlier period to more than $4.4 billion, driven by "robust demand for AI networking," he said. "We expect growth in AI semiconductor revenue to accelerate to $5.1 billion in Q3, delivering 10 consecutive quarters of growth, as our hyperscale partners continue to invest."
Broadcom Stock Drops After Report
Semiconductor products contributed 56% of Broadcom's revenue in fiscal Q2, with infrastructure software providing the remaining 44%.
In after-hours trading on the stock market today, Broadcom stock dropped more than 4% to 248.76. During the regular session Thursday, Broadcom stock slid 0.4% to close at 259.93.
On Tuesday, Broadcom stock broke out of a 24-week consolidation pattern at a buy point of 251.88, according to IBD MarketSurge charts. The breakout followed the launch of the company's Tomahawk 6 switch chip for data centers.
On Wednesday, Mizuho Securities analyst Vijay Rakesh named Broadcom stock one of his top picks in the semiconductor industry. The others are Micron Technology and Nvidia.
Rakesh likes Broadcom for its strong profitability and free cash flow. The company is benefiting from the AI megatrend with its custom processor and networking chip businesses, he said in a client note.
Broadcom stock is on three IBD lists: Leaderboard, Big Cap 20 and Tech Leaders.
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