Broadcom boosts revenue forecast from AI chips, unveils stock split

By Arsheeya  Bajwa

 

(Reuters) - Broadcom raised its annual forecast for revenue from chips that help in artificial intelligence work by 10% on Wednesday, and announced a stock split to take advantage of a rally in its shares this year.

 

Shares of the Palo Alto, California-based chipmaker surged 12% in extended trading.

 

The company expects $11 billion in revenue from AI-linked chips in 2024, up from its previous forecast of $10 billion.

 

Broadcom manufactures advanced networking chips that help move around vast amounts of data used by AI applications such as OpenAI’s ChatGPT, making it one of the beneficiaries of businesses heavily investing in the boom.

 

Broadcom recorded revenue of $3.1 billion from AI products during the second quarter.

 

The company, which has seen its stock rally more than 30% so far this year, after almost doubling in 2023, will carry out a 10-for-1 forward stock split, in a bid to make its shares more affordable for retail investors.

 

The split-adjusted trading is expected to begin on July 15.

 

Its custom chips unit has also attracted orders from large cloud providers looking to reduce their dependence on Nvidia’s pricey processors. Broadcom is widely considered to be making custom chips for Google and Meta.

 

Revenue from Broadcom’s semiconductor solutions segment, which houses its networking and custom chips, rose about 6% to $7.20 billion in the quarter.

 

"As the data center market moves to AI servers, Broadcom’s upside is extremely high. In many ways (Broadcom) will be the second-biggest beneficiary of this shift, next to Nvidia," said Ben Bajarin, analyst at Creative Strategies.

 

Revenue from the company’s infrastructure software segment more than doubled, thanks in part to its purchase of VMware.

 

Broadcom raised full-year revenue forecast by $1 billion to $51 billion. It also raised its annual core profit projections and beat LSEG estimates for second-quarter adjusted earnings per share and revenue.

 

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar)