Broadcom, the top designer of custom artificial intelligence processors, is seen getting a boost from sales of chips for AI data centers when it posts fiscal third-quarter results next week. Broadcom stock dropped on Friday.
The Palo Alto, Calif.-based fabless chipmaker and infrastructure software provider will release its fiscal Q3 results late Thursday.
Analysts polled by FactSet expect Broadcom to earn an adjusted $1.66 a share on sales of $15.83 billion in the quarter ended Aug. 3. In the year-earlier period, Broadcom earned an adjusted $1.24 a share on sales of $13.07 billion. Wall Street's targets translate to year-over-year growth of 34% in earnings and 21% in sales.
Investors are likely to focus on the company's exposure to AI data centers through its custom AI accelerators and networking chips.
Broadcom makes specialized AI processors for Alphabet's Google, Facebook parent Meta Platforms and TikTok parent ByteDance. Those application-specific integrated circuits, or ASICs, are an alternative to graphics processing units, or GPUs, made by Nvidia and AMD. AI ASICs are also called XPUs, short for extended processing units.
Broadcom reportedly also has won contracts to make AI processors for Apple, OpenAI and SoftBank.
For the current quarter, Broadcom's fiscal Q4, analysts are looking for adjusted earnings of $1.80 a share on sales of $17.01 billion. In the same quarter last year, Broadcom earned an adjusted $1.42 a share on sales of $14.05 billion.
Broadcom Stock Slides After Marvell Report
Late Thursday, Broadcom rival Marvell Technology disappointed investors with its softening AI ASIC business. Marvell posted its fiscal second-quarter results after the market close.
On the stock market today, Marvell stock plunged 18.6% to close at 62.87. Meanwhile, Broadcom stock retreated 3.7% to close at 297.39.
The deceleration in Marvell's AI chip business appears to be company-specific, analysts say.
Its share of the custom chip business from Amazon is in doubt as the cloud computing giant uses Alchip as a second source. Also, production of Marvell's chip for Microsoft may have been pushed back.
"Cutting AI estimates into what is supposed to be a hyperscaler capex pickup is suboptimal," Melius Research analyst Ben Reitzes said in a client note. "We expect Broadcom to tell a much different story next week since it has more exposure to Google and Meta vs. Amazon."
Broadcom stock is on three IBD lists: Big Cap 20, Leaderboard and Tech Leaders.
Marvell stock is on the Tech Leaders list.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
