AI business is booming! Broadcom's Q1 revenue exceeded expectations, but the full-year guidance is disappointing, leading to a nearly 3% drop in stock price. | Financial Report Insights

After the U.S. semiconductor giant Broadcom's first-quarter revenue exceeded market expectations, but the annual guidance disappointed investors, the company's stock price fell nearly 3% after hours.

On March 7th local time, after the U.S. stock market, Broadcom released its financial report, showing that for the first quarter of the 2024 fiscal year ending on February 4, 2024, the company's net revenue increased by 34% year-on-year to $11.961 billion, higher than the analysts' forecast of $11.8 billion. The adjusted net profit was $5.25 billion, also higher than the analysts' expectation of $5.01 billion. The adjusted earnings per share were $10.99, compared to the expected $10.30 per share.

For the entire fiscal year, Broadcom maintained a revenue guidance of about $50 billion, slightly lower than analysts' expectations. CEO Hock Tan stated in a later earnings conference call that it is expected that nearly one-fifth of the company's revenue in 2024 will come from artificial intelligence.

Specifically, Broadcom's artificial intelligence business performed better than expected in the first quarter, while other businesses did not perform well.

Tan stated that the first-quarter revenue from artificial intelligence doubled compared to the same period last year, reaching $2.3 billion, which significantly offset the losses caused by the current cyclical slowdown.

Tan also said, "We told everyone in December that revenue from artificial intelligence would account for 25% of our annual semiconductor revenue. We now expect that revenue from artificial intelligence will be even stronger, accounting for about 35% of semiconductor revenue, exceeding $10 billion, which is enough to offset the weaker-than-expected impact of broadband and server storage demand."

At the same time, revenue from the semiconductor solutions department in the first quarter increased by 4% to $7.39 billion, slightly lower than analysts' expectations of $7.45 billion.

Broadcom is known for its custom chips and is considered a leader in the ASIC (Application-Specific Integrated Circuit) market. Driven by optimism in AI, Broadcom's stock price has risen by nearly 30% year-to-date.

Tan stated that Broadcom's first-quarter networking revenue increased by 46%, mainly driven by the demand for custom AI chips from two large-scale customers, but he did not disclose the names of the customers.

Broadcom is currently valued at about $650 billion, ranking ninth in the S&P 500 index, above Tesla but below Eli Lilly.