Broadcom announced its fiscal second-quarter earnings on Wednesday, reporting revenue that fell short of analyst expectations, primarily due to softer-than-anticipated software sales. Despite robust growth in its AI chip segment, the company's stock experienced a decline in extended trading.
The semiconductor giant's overall revenue climbed 48% year-over-year to $22.19 billion, slightly missing the $22.27 billion estimated by LSEG. This outcome occurred even as demand for custom AI chips had driven revenue surges in recent quarters.
For the second quarter, Broadcom reported adjusted earnings per share of $2.44, surpassing the estimated $2.40. Net income for the quarter increased 88% from the previous year, reaching $9.31 billion, or $1.91 per share, compared to $4.97 billion, or $1.03 per share, a year earlier. The company also projected revenue for the current quarter to be approximately $29.4 billion, exceeding Wall Street analysts' expectation of $28.53 billion.
AI revenue more than doubled annually in the second quarter, reaching $10.8 billion. CEO Hock Tan attributed this growth to the company's custom AI chips and networking components. Broadcom helps other technology firms design custom chips, providing intellectual property and essential AI chip technologies, attracting significant investor attention as cloud giants develop their own custom silicon.
Tan highlighted six core custom chip customers, including Anthropic, Google, Meta, and OpenAI, as key drivers of AI revenue growth. However, the company reiterated its forecast for AI semiconductor sales to exceed $100 billion in 2026, without raising the target, which contributed to investor concern. Broadcom also indicated a strategic shift, planning to offer "chips only" instead of complete integrated AI systems.
The semiconductor solutions division, which encompasses AI accelerators, networking, and Wi-Fi chips, reported revenue of $15.1 billion, surpassing StreetAccount's estimate of $14.72 billion. In contrast, the company's enterprise software segment, largely acquired through its 2023 purchase of VMware, generated $7.18 billion in infrastructure software revenue. Although this represented a 9% annual increase, it fell short of analysts' expectations of $7.32 billion.
Prior to the earnings report, Broadcom shares had seen considerable growth, rising nearly 40% year-to-date as of Wednesday's close, outperforming the Nasdaq's 16% gain. The stock had also multiplied almost ninefold since late 2022, following the onset of the generative AI boom.
