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Investing.com - Shares in Broadcom (NASDAQ:AVGO) edged lower in premarket U.S. trading on Friday, as a higher-than-anticipated third-quarter revenue outlook failed to impress investors hoping for significant growth driven by booming enthusiasm around artificial intelligence.
Still, the group’s stock price has climbed by around 12% so far this year, bolstered by demand for its customized AI chips, especially from cloud-computing firms aiming to find alternative sources for processors beyond those designed by semiconductor giant Nvidia (NASDAQ:NVDA).
CEO Hock Tan told analysts in a post-earnings call that AI chip revenue is expected to accelerate to $5.1 billion in its third quarter, "delivering ten consecutive quarters of growth, as our hyperscale partners continue to invest". However, Tan flagged that non-AI semiconductor sales have relative slow to recover.
In its fiscal second quarter, California-based Broadcom’s semiconductor segment, which focuses largely on supplying items to networking and data center clients, posted a 16.7% jump in revenue to $8.41 billion.
Group-wide adjusted earnings per share (EPS) came in at $1.58 on revenue of $15 billion. Analysts polled by Investing.com had anticipated EPS of $1.57 on sales of $14.87 billion.
Writing in a note to clients, analysts at Baird called the results "strong", adding that the company is positioned to "remain the leader" in customer AI chip solutions and could be boosted further by demand for its new Tomahawk 6 networking processor.
Broadcom said it now expects to deliver third-quarter revenue of about $15.8 billion, versus estimates of $15.77 billion. Adjusted core earnings for the period is also forecast to be approximately 66% of projected revenue.
(Yasin Ebrahim and Reuters contributed reporting.)