Broadcom Surges on AI-Driven Earnings Beat and Strong Guidance
The chipmaker's stock jumped after reporting a 63% surge in AI-related revenue and securing a major new order for custom AI accelerators.
Broadcom Inc. (NASDAQ: AVGO) shares surged after the company reported stellar third-quarter financial results, driven by booming demand for its artificial intelligence products. The company that surpassed Wall Street expectations and provided a bullish forecast for the fourth quarter, signaling continued momentum in the AI sector.
The semiconductor and software giant posted Q3 revenue of $15.95 billion, beating analysts' estimates of $15.82 billion. The standout figure was the 63% year-over-year growth in AI revenue, which reached $5.2 billion. This robust performance was fueled by high demand for the company's custom AI accelerators and advanced networking technology.
"Broadcom achieved record third quarter revenue on continued strength in custom AI accelerators, networking and VMware," said Hock Tan, President and CEO of Broadcom. "We expect growth in AI semiconductor revenue to accelerate to $6.2 billion in Q4, delivering eleven consecutive quarters of growth, as our customers continue to strongly invest."
In a significant development, Broadcom also revealed it had secured a new $10 billion order from a major customer for a custom AI chip, widely speculated to be for OpenAI's expanding infrastructure needs. This move reinforces Broadcom's position as a key supplier in the rapidly growing AI hardware market. The market reaction was immediate, with over 9% on the news.
Looking ahead, Broadcom projected fourth-quarter revenue of approximately $17.4 billion, well above the consensus estimate of $17.01 billion. This optimistic guidance reflects the company's confidence in the sustained demand for its AI-related products and its successful integration of VMware, which continues to contribute significantly to its software revenue. The strong earnings report has prompted analysts to re-evaluate their positions, with many suggesting investors should given the powerful tailwinds from the AI industry.