Broadcom falls on downbeat guidance; brokers positive amid AI tailwinds

Investing.com -- Broadcom offered in-line revenue guidance for the current quarter while third-quarter results beat analysts' forecasts as the chipmaker expects AI-related spending on infrastructure software and semiconductors to boost demand.

Broadcom Inc (NASDAQ:AVGO) shares fell 4.5% in after-hours trading following the report.

Broadcom reported earnings per share of $10.54 on revenue of $8.88 billion. Analysts polled by Investing.com anticipated EPS of $10.43 on revenue of $8.85B.

Revenue in the quarter was supported by "demand for next generation networking technologies as hyperscale customers scale out and network their AI clusters within data centers," the company said.

Semiconductor solutions, its core business, rose 78% to $6.94B, while infrastructure software rose 22% to $1.94B.

Looking ahead to the fourth quarter, revenue was expected to come in at $9.27B, up 4% from the prior year period, in line with Wall Street's estimates for $9.27B.

Mizuho analysts lifted the price target by $120 to $960 per share.

"With industry-leading GM/OM at ~75%/~62%, FCF/year >$18B, we maintain our Buy," they said.

Goldman Sachs analysts expect that strength in AI/Hyperscale will more than offset a moderation in Enterprise.

"With AI revenue guided to increase ~50% qoq (or ~2x yoy) and the company pointing to a robust backlog, we increase our FY24/25 Semiconductor Solutions segment revenue forecast by 5%/8%, respectively, and our FY24/25 non-GAAP EPS (excl. SBC) forecasts by 3%/4% to $49.63/$56.51, respectively," the analysts wrote.

(Additional reporting by Senad Karaahmetovic)