Broadcom forecast first-quarter revenue above estimates due to strong demand for AI chips

(Reuters) – Broadcom forecast on Thursday that first-quarter revenue would come in above Wall Street estimates, betting on booming demand for its custom-made artificial intelligence chips and networking equipment from cloud providers as it rolls out the GenAI infrastructure would double.

Shares of the Palo Alto, California-based company rose over 3% in extended trading, after gaining about 60% so far this year and being one of the biggest beneficiaries of a rally in AI-linked stocks.

Big Tech is seeking to reduce its reliance on expensive, supply-limited AI processors from front-runner Nvidia and is backing Broadcom, which makes advanced custom artificial intelligence chips for so-called hyperscalers.

Demand for Broadcom’s networking chips, which help transport massive amounts of data used by applications like OpenAI’s ChatGPT, has also increased as companies double down on investments in GenAI infrastructure.

The company forecast first-quarter revenue of about $14.6 billion, compared with an average analyst estimate of $14.57 billion, according to data compiled by LSEG.

Although it faces stiff competition from Nvidia’s Ethernet-like Infiniband products, Broadcom still benefits from AI data center expansion because it is one of the largest providers of advanced networking equipment.

While Broadcom was celebrated as a chipmaker, it has become a technology conglomerate thanks to acquisitions such as its $69 billion acquisition of cloud computing company VMware. The infrastructure software segment grew 196% to $5.82 billion in the fourth quarter.

The company reported fourth-quarter revenue of $14.05 billion, compared to expectations of $14.09 billion.

On an adjusted basis, Broadcom earned $1.42 per share, compared to estimates of $1.38 per share.

(Reporting by Arsheeya Bajwa and Zaheer Kachwala in Bengaluru; Editing by Krishna Chandra Eluri)