Stocks of Broadcom Slip After Earnings as Forecasts Fail to Meet Expectations

Broadcom Inc. experienced a 4% decline in premarket trading on Friday, as the semiconductor and software company issued a revenue projection for the current quarter that did not surpass the consensus forecast.

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For the fiscal third quarter, the company reported a net income of $3.30 billion, equivalent to $7.74 per share, compared to $3.07 billion, or $7.15 per share, in the corresponding period the previous year.

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Following adjustments, Broadcom (AVGO) posted earnings of $10.54 per share for the quarter, compared to $9.73 per share in the same quarter a year ago. Analysts surveyed by FactSet had anticipated earnings of $10.43 per share.

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Revenue for the quarter increased to $8.88 billion, up from $8.46 billion in the same period the prior year, with analyst estimates pegged at $8.85 billion.

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Chip sales registered a 5% growth, reaching $6.94 billion compared to the previous year, and infrastructure software sales also saw a 5% uptick, totaling $1.94 billion. The FactSet consensus had predicted chip sales of $6.97 billion and software sales of $1.89 billion.

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Hock Tan, Chief Executive, attributed these latest results to the demand for next-generation networking technologies, particularly from hyperscale customers expanding and enhancing their AI clusters within data centers.

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Broadcom reported generating $4.6 billion in free cash flow during the third quarter.

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The company's outlook for the fiscal fourth quarter anticipates revenue of approximately $9.27 billion, aligning with the FactSet consensus.

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Year to date, Broadcom shares have demonstrated strong performance, with a 65.1% increase, while the PHLX Semiconductor Index has risen by 45.0%. In contrast, the S&P 500 index has advanced by 17.4%, and the tech-heavy Nasdaq Composite has shown a gain of 34.1%.

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