(Bloomberg) — Broadcom Inc., a chip supplier to Apple Inc. and other big technology companies, gave a lackluster revenue forecast, a sign that weaker demand for non-AI products is slowing growth.
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Sales in the fourth fiscal quarter, which runs through October, will be around $14 billion, the company said in a statement on Thursday. Analysts had expected around $14.1 billion.
The forecast suggests that Broadcom’s non-AI business is growing more slowly than expected. While the company has benefited from a surge in spending on artificial intelligence, its other businesses have not been as affected by this boom. The company offers a wide range of products, including mainframe products, security and data center software, mobile phone chips and data storage devices.
Broadcom shares fell about 5% in trading following the announcement. The stock closed at $152.82 in regular New York trading, up 37% for the year.
The company expects full-year revenue of $12 billion from AI-related products, beating the average analyst forecast of $11.8 billion, suggesting the shortfall in the overall quarterly revenue forecast is due to other areas.
Earnings per share in the third quarter, excluding some special items, were $1.24. The average earnings estimate was $1.22. Revenue rose to $13.07 billion, compared to the forecast of $13.03 billion. The company is much larger than it was a year ago, in part due to the acquisition of VMware Inc., which it bought for about $69 billion.
Broadcom’s semiconductor division generated revenue of $7.27 billion in the three months ended August 4. Software sales totaled $5.8 billion.
CEO Hock Tan has built Broadcom into one of the biggest players in the chip industry through a series of acquisitions. His strategy is to find companies that are leaders in certain areas, buy those companies, and then focus them exclusively on those areas. Tan has also used this formula to expand into the software space.
The boom in AI spending has made Broadcom’s chip rival Nvidia Corp. the biggest and most valuable company in the industry. Nvidia sells so-called AI accelerators that help develop tools like ChatGPT, but Broadcom has also benefited by supplying related components and software.
Data center providers rely on Broadcom’s custom chip design and networking semiconductors to build their AI systems. The company also sells components for cars, smartphones and internet access devices. Its foray into software includes products for mainframes, cybersecurity and data center optimization.
Apple is also an important customer: Broadcom supplies key components for the iPhone. During earnings calls, Tan usually discusses the often contentious relationship between Broadcom and Apple, which he indirectly refers to as his “North American customer.”
(Updated with additional results in the fifth paragraph.)
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