Nvidia's rival chipmaker Broadcom gave a strong outlook. What about the stock?
Shares of contract microprocessor maker Broadcom plunged about 5 percent in the Dec. 11 postmarket, even though its full-year outlook and quarterly results beat analysts' expectations. Investors didn't like the size of the backlog for the next six quarters, which the company announced in a conference call after the report, Bloomberg writes. That said, Broadcom's securities have more than doubled in value since April amid a ramp-up in AI investment by hyperscalers. Investors expect the company to be a key beneficiary of that spending.
As the chipmaker reported
Broadcom's revenue in the fourth quarter of fiscal 2025, which ended Nov. 3, rose 28% to $18.02 billion versus Wall Street's forecast of $17.49 billion, CNBC reported. Adjusted earnings per share rose 37% to $1.95, while the consensus estimate called for $1.86.
The company said it received an $11 billion order from AI startup Anthropic in the quarter, warning that the growth in AI chip sales was accompanied by a decline in overall profitability. It also signed another $1 billion contract, but did not name the customer.
Broadcom said it expects annual sales of AI chips to double to $8.2 billion, and it expects revenue to grow to $19.1 billion in the current quarter - by comparison, the average Wall Street forecast was $18.5 billion, Bloomberg points out.
What investors didn't like
Immediately after the report was published, Broadcom's shares jumped 3% on the postmarket, but during a conference call with analysts, the company's CEO Hock Tan said that the size of its order book for AI chip shipments over the next six quarters is $73 billion. This figure disappointed some investors and led to the quotations turning around and going down by 5%, Bloomberg explains . At the same time, Tan clarified that it is a "minimum": "We expect much more as new orders come in with deliveries within the same six quarters," the agency quoted him as saying. - Depending on the product, the delivery period could be six months to a year."
Context
The company is actively increasing sales of custom chips for data centers, taking share away from industry leader Nvidia. One of the key drivers of Broadcom's stock growth in recent months has been cooperation with major AI model vendors. ChatGPT developer OpenAI signed an agreement with the chipmaker in October to build its own AI semiconductors. The deal involves using Broadcom's custom chips and networking components to support AI services. This will provide additional revenue growth for the custom chips division and expand the company's presence in the rapidly growing AI market, Bloomberg writes.
In addition, AI startup Anthropic has pledged to utilize Google Cloud infrastructure based on Tensor Processing Units (TPUs), also created with Broadcom. Google's new Gemini 3, warmly welcomed by analysts, was also trained on TPUs, leading Broadcom's stock to surge in late November
On December 8, the company's securities hit an all-time high as investors reacted to a report by insider publication The Information that Microsoft could become its client.
This article was AI-translated and verified by a human editor
