Chip design leader Broadcom Inc. (NASDAQ: AVGO) reported its third-quarter fiscal results after market close on September 5th, releasing figures that exceeded Wall Street’s expectations for the period. Despite the beat on Q3 estimates, the stock faced immediate pressure, closing down 10.36% at $136.99 on September 6th. The market reaction appeared to prioritize the company’s near-term outlook, which analysts felt lacked sufficient upside surprise. The stock’s 52-week range at the time showed significant volatility, spanning from a low of $79.51 to a high of $185.16.
For the third fiscal quarter ending August 4th, Broadcom posted revenue of $13.07 billion, slightly above the $12.97 billion consensus forecast. The reported net loss was $1.88 billion, a figure primarily attributed to a one-time $4.5 billion tax provision related to an intellectual property transfer. However, excluding this item, adjusted earnings per share (EPS) came in at $1.24, successfully beating the analyst forecast of $1.20.
Looking ahead, the company guided for fourth-quarter revenue of approximately $14.0 billion. This projection, while representing sequential growth, was slightly below the analyst consensus of $14.04 billion and seemed to be the main catalyst for the negative stock reaction.
CEO Hock Tan highlighted the strength in AI semiconductor solutions and VMware as key drivers for the quarter. Notably, the forecast for fiscal year 2024 AI sales was raised to $12 billion (from $11 billion), signaling continued growth in this critical area. Segment-wise, infrastructure software surged 200% year-over-year, largely due to the VMware acquisition completed in November 2023 for $69 billion, while the larger semiconductor division grew by 5%.
Analyst sentiment tracked by Tipranks remained largely positive following the report, with 22 out of 23 analysts recommending “Buy” and only one suggesting a “Hold,” setting an average one-year price target of $197.05.
In summary, Broadcom’s Q3 report presented a mixed picture: a beat on adjusted earnings and robust performance drivers in AI and VMware were contrasted with slightly conservative near-term guidance, leading to immediate stock volatility despite analysts’ apparent long-term confidence in the company’s prospects.
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Riley Evans