(Bloomberg) — Broadcom Inc., a chip supplier to Apple Inc. and other major technology companies, fell in late trading after issuing a disappointing revenue forecast. The decline was driven by the part of its business that is not tied to artificial intelligence.
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Revenue will be about $14 billion in the fiscal fourth quarter, which ends in October, the company said in a statement Thursday. Analysts had forecast about $14.1 billion.
The forecast suggests that Broadcom’s non-AI business is growing more slowly than expected. While the company has benefited from a surge in artificial intelligence spending, its other divisions aren’t as connected to the bonanza. The company has a wide range of offerings, including mainframe products, security and data center software, mobile phone chips and data storage equipment.
Broadcom shares fell about 6% in extended trading after the announcement. The stock closed at $152.82 in regular New York trading, putting it up 37% for the year.
The company forecast $12 billion in revenue from AI-related products for the full year, topping the average analyst forecast of $11.8 billion. That suggests the shortfall in the overall quarterly sales forecast came from other areas.
Chief Executive Officer Hock Tan said most of his non-AI chip businesses are at or through their lows. Revenue in some of those markets has returned to sequential growth, though it’s still well below year-ago levels. Bookings — an indicator of future sales — are up 20%, he said. There’s no reason those markets can’t return to previously high levels, he said.
“In aggregate, we have bottomed out in our non-AI markets and we expect recovery in the fourth quarter,” he said on a conference call with analysts. “Demand for AI remains strong.”
Third-quarter earnings were $1.24 a share, excluding some items. That compared with an average estimate of $1.22. Revenue rose to $13.07 billion, compared with a forecast of $13.03 billion. The company is much larger than it was a year ago, in part because of its acquisition of VMware Inc., which it bought for about $69 billion.
Broadcom’s semiconductor division posted revenue of $7.27 billion for the three months ended Aug. 4. Software revenue was $5.8 billion.
Tan says he is confident that AI will still be strong next year.
The CEO built Broadcom into one of the biggest players in the chip industry through a series of acquisitions. His strategy is to find companies that are dominant in certain areas, buy them, and then refocus them exclusively on those areas. Tan has also used that formula to expand into software.
The AI spending boom has turned Broadcom’s chip peer Nvidia Corp. into the largest, most valuable company in the industry. Nvidia sells so-called AI accelerators that help develop tools like ChatGPT, but Broadcom has also benefited by supplying related components and software.
Data center providers rely on Broadcom’s custom chip design and networking semiconductors to build their AI systems. The company also sells components for cars, smartphones and internet access equipment. Its push into software, meanwhile, includes products for mainframe computers, cybersecurity and data center optimization.
Apple is also a top customer: Broadcom supplies key components for the iPhone. During earnings calls, Tan typically provides updates on Broadcom’s often contentious relationship with that company, which he indirectly calls his “North American customer.”
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