The chip designer reported rapid revenue growth on Thursday as demand surged for silicon to stuff data centres that power artificial intelligence models. Yet the cocaine nose jobs on Wall Street quickly started poking at forecasts and margins, not liking what they saw.
Broadcom posted a profit of US$8.518 billion, or US$1.74 a share, for its fiscal fourth quarter ending in early November, up from US$4.3 billion and 90 cents a year earlier.
Quarterly sales hit a record US$18.02 billion, while full-year revenue reached US$63.9 billion, beating analyst estimates of US$17.5 billion and US$63.3 billion, respectively.
In a statement, Broadcom's chief executive, Hock Tan, pinned the growth squarely on AI chips and projected US$8.2 billion in AI revenue for the first quarter, well ahead of the US$6.9 billion consensus.
Shares initially rose more than two per cent after hours before sliding about five per cent to US$385.15 as executives fielded analyst questions on a conference call.
Tan warned that fast-growing AI revenue carries lower gross margins than the rest of the business, while non-AI revenue in the first quarter is expected to be flat.
At one point, Tan appeared to play down the rise of custom AI accelerator chips, known internally as XPUs, despite Broadcom’s heavy involvement in the space.
Tan said, “Many large AI software developers, especially makers of large language models, want to make their own custom chips,” but suggested GPUs were evolving so fast that demand would not dry up.
He added that general-purpose GPUs “are becoming so powerful so quickly with each new generation that they remain hard to displace."
The company has largely shrugged off the tech sell-off that began in late October, which wiped hundreds of billions off market values amid fears of an AI bubble.
Oracle shares dropped more than 10 per cent on Thursday after warning that data centre capital spending would outrun revenues for several quarters.
More optimistic analysts reckon Broadcom’s business will keep swelling as custom AI chips take a bigger bite of the market.
By the end of the decade, custom AI processors could make up between 25 and 30 per cent of accelerated computing, according to Futurum Group, up from a sliver today.
Futurum Group chief executive Daniel Newman expects the broader AI chip market to reach around US$1 trillion a year, with Broadcom controlling 70-80 per cent of the custom segment.
“People used to talk about how software was going to eat the world, but now semiconductors are eating the world, and Broadcom has really just mastered the class of custom silicon for AI,” Newman said.
“This market is only going to get bigger, and all these AI companies are only going to need more chips,” he added.
