Broadcom Lifts AI Revenue Outlook, But Stock Tumbles After Muted Earnings

AI's Growth Potential

Despite mixed earnings results, Broadcom Inc. has raised its revenue forecast for its artificial intelligence (AI) business, signaling confidence in the sector's growth potential. The company now expects AI revenue to grow 15% to 20% in fiscal 2024, up from its previous estimate of 10% to 15%.

Broadcom's optimism stems from the increasing adoption of AI across various industries, including data centers, cloud computing, and automotive. The company sees AI as a key driver of its future growth, alongside its core semiconductor business.

Mixed Earnings Performance

However, Broadcom's overall earnings report for the fourth quarter of 2023 was mixed. While revenue increased 8% year-over-year to $8.9 billion, it fell short of analyst expectations. Net income also declined 13% to $3.3 billion.

The weaker-than-expected earnings were attributed to a slowdown in demand for Broadcom's chips from major customers, particularly in the smartphone and data center markets. The company also faced higher costs related to its recent acquisition of VMware.

Stock Market Reaction

Investors reacted negatively to Broadcom's earnings results, sending the company's stock down more than 3% in after-hours trading. The stock's decline suggests that investors are concerned about the company's ability to meet its financial targets amid a challenging economic environment.

Analysts' Outlook

Analysts remain cautious on Broadcom's stock, despite the company's positive outlook for its AI business. Many believe that the company faces headwinds from the broader economic slowdown and competition from other AI chipmakers.

However, some analysts see Broadcom's strong position in the AI market as a long-term advantage. They argue that the company's investment in AI will pay off in the future as the technology becomes more widely adopted.