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Investing.com - Broadcom delivered upbeat guidance for the current quarter following better-than-expected fiscal first-quarter results that were underpinned by solid demand for its custom AI chips.
Shares in Broadcom (NASDAQ:AVGO) jumped more than 12% in premarket U.S. trading following the report.
The California-based company, which manufactures custom AI chips for major cloud providers that help large language models quickly process reams of information, has been boosted recently by supply constraints at industry-leader Nvidia (NASDAQ:NVDA). The backlog has forced some mega-cap technology firms like Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) to look beyond Nvidia -- and at alternatives like Broadcom and smaller peer Marvell (NASDAQ:MRVL) -- for their chips.
For the three months ended February 2, Broadcom announced adjusted earnings per share of $1.60 on revenue of $14.92 billion. Analysts polled by Investing.com anticipated per-share income of $1.51 on revenue of $14.59 billion.
AI revenue, a central focus for investors, grew 77% year-over-year to $4.1 billion in the first quarter. Semiconductor solutions, its core business, rose 55% to $8.2 billion, while infrastructure software rose 45% to $6.7 billion.
Looking ahead to its fiscal second quarter, revenues are expected to be $14.9 billion, topping consensus of $14.73 billion.
CEO Hock Tan said the firm sees revenue from its AI semiconductors coming in at $4.4 billion, adding in a post-earnings call that Broadcom now has four more hyperscale customers who are "deeply engaged" with it to manufacture their own custom chips. These four were not included in Broadcom’s prior estimate for a revenue opportunity of $60 billion to $90 billion in 2027, he noted.
The comments come as investor sentiment around AI has been clouded over by the emergence of a low-cost AI model from Chinese start-up DeepSeek, which has raised concerns over the immediate returns on Big Tech’s soaring investments in the nascent technology. Analysts have also flagged worries over Broadcom’s business with iPhone-maker Apple (NASDAQ:AAPL), who is currently moving to design more of its processors in-house.
"Perhaps the AI trade isn’t as dead as feared? The general trends in Broadcom’s near-term business appear similar to what we have observed for a while, namely weak core business more than offset by AI strength (which is probably fine for now), and over the next several quarters that AI strength should continue to ramp into the second half," analysts at Bernstein wrote in a note to clients.
"But amid AI nervousness management’s view of the future is becoming even more positive."
(Yasin Ebrahim contributed reporting.)