Broadcom forecasts quarterly revenue below estimates, signalling intense competition

Broadcom AVGO-Q forecast quarterly revenue below Wall Street estimates on Wednesday, signalling intense competition could hamper gains from its custom processors.

Shares of the Palo Alto, California-based company were down over 3% in extended trading. They have gained about 6% this year, significantly underperforming rivals and the broader semiconductor index.

While Broadcom is a key player in the chip sector, it lags behind AI bellwether Nvidia whose dominant graphics processors remain the industry standard for AI workloads.

The company expects fourth-quarter revenue of about US$34.8-billion, compared with analysts’ average estimate of US$35.03-billion, according to data compiled by LSEG.

Broadcom also said it expects AI chip sales of US$21.7-billion in the fourth quarter, slightly above estimates of US$21.33-billion, according to analysts polled by Visible Alpha.

The company’s customers are also signing deals with rival firms. Last month, Marvell struck a custom chip deal with Google that could bring in US$120-billion in revenue through fiscal 2033 and make the search giant one of its biggest investors with an up to US$12.2-billion stake.

Broadcom’s ability to meet explosive AI demand has also been tested by a strained supply chain. To reduce its reliance on any single manufacturer, the company in July signed a multi-year memorandum of understanding with Samsung Electronics , worth over US$200-billion.

AI chip sales more than tripled to US$16.7-billion in the third quarter, lifting Broadcom’s total revenue to US$29.59-billion. Adjusted profit came in at US$3.32 per share.