Chip giant Broadcom (AVGO, Financial) reported better-than-expected second-quarter results, yet its third-quarter guidance left some investors underwhelmed. For the second quarter ending May 4, Broadcom's sales increased by 20% year-over-year to $15 billion, slightly above analysts' expectations of $14.96 billion. Adjusted net profit rose by 44% to $7.79 billion, with adjusted earnings per share at $1.58, surpassing the anticipated $1.56.
The semiconductor solutions segment, providing products for data centers and networking, saw a 17% revenue increase to $8.41 billion, exceeding the forecasted $8.39 billion. CEO Hock Tan attributed the record-high revenue to both semiconductor solutions and the growth of VMware, a cloud computing firm acquired by Broadcom in 2023. AI-related revenue grew by 46% to $4.4 billion, driven by network equipment demand, though this marked a slowdown from the previous quarter's 77% growth.
For the third quarter ending August 3, Broadcom anticipates sales of $15.8 billion, a 21% increase year-over-year, slightly above the $15.72 billion expected by analysts but $1 billion short of the most optimistic forecasts. AI-related revenue is projected to rise to $5.1 billion, again surpassing the $4.79 billion forecast but falling short of some estimates as high as $5.29 billion.
Despite Broadcom's stock rising over 30% since March, largely due to anticipated AI spending, the modest Q3 guidance suggests that the AI spending surge may not be as robust as some investors hoped. Following the announcement, Broadcom's shares fell over 4% in after-hours trading.
