Broadcom Inc. has forecast a strong quarter, driven by growing need for its artificial intelligence (AI) chips. The company’s revenue outlook surpassed analysts’ expectations, highlighting Broadcom’s key role in powering AI data centers worldwide.
Revenue Forecast Beats Estimates
On June 5, Broadcom announced it expects $11.6 billion ± $400 million in revenue for its fiscal third quarter—well above the $10.7 billion average forecast by analysts. This new target represents more than a 15% increase from the $10.0 billion reported one year earlier. Broadcom cited “continued strength in demand for data center products” as the main reason for this optimistic outlook.
Following the announcement, Broadcom’s stock price rose about 4% in after-hours trading, reflecting confidence that the company is capturing a growing share of the AI hardware market. Over the past year, Broadcom’s stock performance has outpaced many other chipmakers, thanks to its diverse product lineup and key acquisitions.
AI Chips Driving Growth
Broadcom’s semiconductor division is known for high-performance networking chips and custom silicon solutions. Lately, orders have surged from companies building data centers for AI applications. Cloud providers and large enterprises working on generative AI tools rely on Broadcom’s specialized chips—such as AI-optimized ASICs (application-specific integrated circuits) and high-speed networking switches—to handle heavy data processing tasks.
Broadcom CEO Hock Tan emphasized that “AI infrastructure demand remains exceptionally strong,” noting that customers’ orders for next-generation AI accelerators and data-center interconnects continue to exceed initial forecasts. To meet this demand, Broadcom is expanding its production capacity and strengthening partnerships with suppliers.
Industry data shows Broadcom holds a top-two global market share in both high-speed Ethernet switches and custom AI ASICs, second only to Nvidia. Its 2022 purchase of VMware also boosted its software segment, though it is the semiconductor division that is now driving most of the company’s revenue growth.
Healthy Margins and Profitability
Broadcom expects to maintain high profitability in the coming quarter, projecting a 75% non-GAAP gross margin. This strong margin comes from selling premium AI and data-center chips, where competition is less focused on low pricing.
For its previous quarter, Broadcom reported $12.15 in non-GAAP earnings per share on $11.25 billion in revenue—well above expectations of $10.20 per share and $10.15 billion. As a result, the company has raised its full-year revenue forecast to a range of $43.5 billion to $44.5 billion, up from $42.0 billion to $43.0 billion.
Competitive Landscape
Broadcom’s positive outlook follows a broader trend in the chip industry, where demand for AI-related hardware is surging. Nvidia, Intel, and AMD have also reported strong data-center sales. However, Broadcom’s focus on custom silicon and networking equipment gives it an edge in multiple areas of the AI hardware stack.
Nvidia is the market leader in AI GPUs, but Broadcom’s chips handle the “plumbing” that moves data between AI servers. As cloud companies and large enterprises build out private AI data centers, that networking layer has become critical. This focus has made Broadcom a key supplier for infrastructure supporting advanced AI models.
Meanwhile, Broadcom’s VMware software business has shown steady growth but remains smaller compared to the semiconductor segment. Some analysts believe integrating VMware’s data-center management tools with Broadcom’s hardware could create new revenue opportunities in hybrid-cloud setups.
Securing Supply and Expansion Plans
To keep up with rising orders, Broadcom has signed multi-year agreements with major chipmaking partners. The company is also investing in a new U.S. wafer manufacturing facility, scheduled to begin pilot production in late 2025. These steps aim to secure enough supply for AI-focused chips, which require advanced manufacturing processes.
Despite global supply-chain challenges, Broadcom’s diversified supplier network has so far prevented shortages. The company’s leadership team has stated that maintaining flexible, redundant production arrangements is crucial as AI hardware lifecycles speed up.
Risks and Outlook
Analysts warn that any slowdown in enterprise AI spending or shifts in cloud providers’ investment plans could affect future growth. Geopolitical tensions and increased regulation around advanced semiconductors are other potential risks.
Nevertheless, Broadcom’s strong balance sheet, with over $8 billion in operating cash flow in the past year, provides flexibility for research and development, possible acquisitions, and returning capital to shareholders via dividends and buybacks.
As AI continues reshaping the tech industry, Broadcom’s expertise in networking, custom silicon, and related software positions it well for ongoing expansion. The company’s revised guidance underscores how AI-driven workloads are reshaping the demand for semiconductors, making Broadcom a major beneficiary of this shift.
