SAN JOSE: Chipmaker Broadcom forecast annual revenue below Wall Street estimates on Thursday (Dec 7), hurt by weak enterprise spending and stiff competition in the networking chips space.

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

In fiscal 2024, the company expects revenue of about US$50 billion including contribution from VMware. This compares to analysts’ average estimate of US$52.5 billion according to LSEG data.

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

Broadcom’s revenue in the fourth quarter was US$9.3 billion, below estimates of US$9.41 billion. However, on an adjusted basis, the company’s profit of US$11.06 per share beat estimates of US$10.98.

The company also forecast annual adjusted EBITDA of about 60% of projected revenue, which comes out to be around US$30 billion, an expected increase of nearly US$7 billion from its 2023 EBITDA.

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

Broadcom finance chief Kirsten Spears had said in September that generative artificial spending was coming from large cloud service providers, and not from enterprises yet.

The company had already seen revenue from telecom and enterprise clients moderate, and with major client Cisco Systems flagging a slowdown in new orders, analysts worry Broadcom will see the impact as well.

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

Competition from Nvidia, whose InfiniBand is being used as an alternative to Broadcom's core offerings for AI, is an added pain. – Reuters

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