Broadcom misses revenue estimates on dull enterprise spending

By Arsheeya Bajwa

(Reuters) – Chipmaker Broadcom on Thursday forecast annual revenue below Wall Street estimates, hurt by weak corporate spending and strong competition in networking chips.

Shares of the San Jose, Calif.-based company, which recently completed its acquisition of cloud computing company VMware, fell more than 1% in extended trading.

For fiscal 2024, the company expects revenue of approximately $50.0 billion, including contribution from VMware. This compares to the average analyst estimate of $52.50 billion according to LSEG data.

“The outlook depends in part on how effectively Broadcom can integrate restructuring into its long-term AI strategy,” said Jacob Bourne, an analyst at Insider Intelligence.

The company also projects annual adjusted EBITDA of approximately 60% of projected revenue of approximately $30 billion, an expected increase of nearly $7 billion over its 2023 EBITDA.

Broadcom’s initial goal was to improve Vmware’s EBITDA contribution to $8.5 billion within three years of closing.

Broadcom Chief Financial Officer Kirsten Spears said in September that artificial spending was coming from large cloud service providers, not yet from enterprises.

The company had already seen moderate revenue from its telecom and enterprise customers, and as major customer Cisco Systems reports a slowdown in new orders, analysts fear Broadcom will see the impact as well.

“We continue to see a very mixed demand environment for Broadcom’s service providers and businesses,” said Kinngai Chan, an analyst at Summit Insights.

Competition from Nvidia, whose InfiniBand is used as an alternative to Broadcom’s core offerings for AI, is an additional problem.

Broadcom’s fourth-quarter revenue was $9.30 billion, below estimates of $9.41 billion.

However, on an adjusted basis, the company’s earnings of $11.06 per share beat estimates of $10.98.

(Reporting by Arsheeya Bajwa in Bangalore; editing by Maju Samuel)