Broadcom’s CEO: AI-related revenue may double, but it is difficult to reverse the market trend

Although Broadcom might not be frequently mentioned, it undeniably holds a formidable position within the semiconductor industry. In previous years, Broadcom nearly executed an unprecedented acquisition of Qualcomm for a record-breaking sum of $130 billion in the technology sector. More recently, they’ve collaborated with Apple, undertaking the development and partial production of 5G radio frequency components, including FBAR filters.

During recent times, numerous semiconductor firms, including Broadcom, have been ensnared in an industry-wide slump. Yet, much like Nvidia, Broadcom has reaped the benefits of the burgeoning AI demand, thereby accelerating its revenue growth. As reported by DigiTimes, Broadcom’s CEO, Hock Tan, asserted in a recent earnings call that AI-related revenue may potentially reach a billion dollars each quarter.

“Broadcom”by nmcbean is licensed under CC BY-NC-ND 2.0

Given the prevailing trend, Broadcom’s AI-related revenue could feasibly double this year, thereby constituting over 25% of its total income. However, due to the challenging market conditions, Broadcom anticipates a mere 5% revenue growth for the upcoming quarter (3QFY23), roughly amounting to $8.85 billion. This represents the first instance of a quarterly increase below 10% since 2020.

For the second quarter of the 2023 fiscal year, Broadcom’s revenue was $8.733 billion, an 8% increase compared to the $8.103 billion from the same period last year, albeit a slight decrease compared to the previous quarter’s $8.915 billion. Net income stood at $3.481 billion, a 34% rise from the $2.59 billion from the same period last year, with the previous quarter sitting at $3.774 billion. Net earnings attributable to common shareholders were also $3.481 billion, in contrast to the $2.515 billion from the same period last year and $3.774 billion from the previous quarter.

Unlike many of his peers, Hock Tan takes a more pessimistic view of the semiconductor industry’s outlook, speculating that in the long run, the market’s growth rate might not outpace the GDP growth of the United States by a significant margin. Although AI-related discussions are currently in vogue, Tan believes that AI systems are limited to a select few cloud computing companies. Given that building and deploying these systems necessitate extended time periods, and component deliveries require up to six months, it remains uncertain whether AI can truly transform the current market landscape.

Regarding regulatory review issues for Broadcom’s acquisition of VMware, Broadcom indicated satisfactory progress, anticipating the transaction’s completion within the year.