Broadcom Inc. shares fell in volatile after-hours trading Thursday after the chip and software company reported strong results and outlook topped Wall Street expectations following a recent run to record high prices.
Broadcom shares
AVGO,
which had finished the regular session down 2.2% to close at $789.95, initially fell as much as 3% after hours. Then, when Chief Executive Hock Tan told analysts on a conference call that he expects generative AI models like Microsoft Corp.
MSFT,
-backed OpenAI’s ChatGPT will account for more than a quarter of revenue in fiscal 2024, shares swung to a 4% gain. But by the time the extended session ended, shares had fallen back into negative territory, down 1.8%.
“Our revenue today, from this opportunity, represents about 15% of our semiconductor business,” Tan told analysts on the call. “Having said this, it was only 10% in fiscal 2022.”
That after-hours swing, however, was short-lived as analysts questioned whether that meant any cannibalization from other segments, given the large increase. Shares declined from there, and were down about 2.5% at the end of the call.
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Hock assured analysts his forecast did “not see cannibalization, but these are the early innings relatively speaking, and budgets don’t change that rapidly.” The CEO estimated that half of the company’s revenue growth will come from generative AI and the other half from its traditional businesses.
The company reported fiscal second-quarter net income of $3.48 billion, or $8.15 a share, compared with $2.52 billion, or $5.93 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation and other items, were $10.32 a share, compared with $9.07 a share in the year-ago quarter.
Revenue rose to $8.73 billion from $8.1 billion in the year-ago quarter, as chip sales rose 9% to $6.81 billion from the year-ago period, and infrastructure software sales rose 3% to $1.93 billion.
Analysts had expected earnings of $10.12 a share on revenue of $8.7 billion. The Street also forecast chip sales, on average, of $6.8 billion and infrastructure software sales of $1.89 billion.
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Broadcom forecast revenue of about $8.85 billion for the July-ending quarter, while analysts surveyed by FactSet estimate $8.72 billion.
Year to date, shares of Broadcom have surged 41%. In comparison, the S&P 500 index
SPX,
has grown 10%, the tech-heavy Nasdaq Composite index
COMP,
has gained 25%, and the PHLX Semiconductor Index
SOX,
has rallied nearly 39%.
Broadcom shares surged to a new record close of $812.73 last Thursday, after Broadcom announced a deal last week with Apple Inc.
AAPL,
to continue supplying certain components for iPhones, after Apple’s recent earnings showed a surprise jump in iPhone sales.
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