Broadcom slumps 7% after chipmaker's sales outlook disappoints

Investing.com -- Shares in Broadcom (NASDAQ:AVGO ) slumped by more than 7% in early US trading Friday after the US chipmaker's current-quarter sales guidance slightly disappointed investors' expectations.

The firm projected that it would deliver $14 billion in revenue in its fourth quarter, just under estimates of $14.04 billion, according to LSEG data cited by Reuters. 

For the July quarter, Broadcom announced adjusted earnings per share of $1.24 on revenue of $13.07 billion. Analysts polled by Investing.com had called for EPS of $1.21 and revenue of $12.97 billion.

But speaking in a post-earnings call, Broadcom executives flagged sluggishness in its broadband unit in particular, reporting that revenue in the segment dropped by 49% in the third quarter.

"Broadband remains weak on a continued pause in [telecommunications] and service provider spending," said Chief Executive Officer Hock Tan. He added that the broadband business will "continue to be down over 40% year-on-year" in the fourth quarter, although it is expected to begin recovering in 2025.

The result tempered strength in demand for the California-based company's critical artificial intelligence-optimized chips. Broadcom once again raised its outlook for full-year sales of AI parts and custom chips to $12 billion, up from its prior forecast of more than $11 billion during the period.

In the third quarter, AI revenue came in at roughly $3.1 billion, according to estimates from analysts at Bank of America. They noted that this number was "flattish sequentially," while Tan said AI sales were "pretty much in line" with what the company had anticipated.

Tan did not reveal any guidance for AI revenue in Broadcom's 2025 fiscal period, although he said it is projected to be "strong."

Even still, Broadcom's latest announcement underwhelmed sky-high expectations, echoing returns from AI semiconductor giant Nvidia (NASDAQ:NVDA ) last week and leading some investors to be on the lookout for any signs that a recent boom in AI chip demand may be fading.

Analysts at Bank of America said in a note to clients that they expect the "inline trends and AI fatigue" to possibly keep Broadcom's stock "volatile near-term," although they argued that they view "any weakness as a particularly attractive buying opportunity."

Yasin Ebrahim, Senad Karaahmetovic and Reuters contributed to this report.

Source: Investing.com