(Bloomberg) — Broadcom Inc., one of the world’s largest chipmakers, acknowledges that sales growth will slow in the second half of the year but predicts a “soft landing” as companies continued spending on enterprise network infrastructure.
Most read from Bloomberg
Revenue for the fiscal second quarter will be around $8.7 billion, Broadcom said in a statement Thursday, compared with the median analyst estimate of $8.58 billion. Chief executive officer Hock Tan said that although the second half of the year will decelerate, Broadcom expects sales to remain up from a year earlier.
The outlook shows that Broadcom continues to weather the downturn better than many of its chip peers. Tan, the company’s longtime head, has sought to avoid excess inventory by carefully managing supplies, relying in part on strict policies that prevent customers from canceling orders.
Broadcom still has a full order book for the rest of the fiscal year. Broadcom said that although some customers have requested a delay in delivery, it has not significantly affected the company’s earnings.
Shares were little changed in late trading after the report was released. They closed at $598.65 in New York.
Broadcom overtook Marvell Technology Inc., another chipmaker that reported earnings Thursday afternoon. It fell more than 9% in extended trading after forecasting margins were weaker than analysts had predicted.
Broadcom’s semiconductors and software are included in a wide range of products, which also helps make it more stable. It supplies chips to Apple Inc. for iPhones and high-end network chips used in data centers by companies like Amazon.com Inc.
Broadcom executives are optimistic about demand for network chips and custom products used to help build the massive computing arrays needed to power artificial intelligence systems like ChatGPT. Customers have become more excited about that field, he said, and are demanding new products for that end use.
Separately, the company’s wireless devices grew only moderately during the quarter and will likely experience a drop in sales in the current period compared with a year earlier. Growth in the past quarter was driven by the company’s large North American customer base – a term he often uses to describe Apple.
Broadcom’s shares have outperformed their chip industry peers in 2022, though they’ve lost some of their traction this year. Shares are up 7% in 2023, compared with 18% for the Philadelphia Stock Exchange Semiconductor Index.
Broadcom, headquartered in San Jose, California, has also expanded into enterprise software by acquiring mainframe and security capabilities. And it is trying to prolong that time by buying VMware Inc. worth $61 billion, a transaction announced in May. The two companies recently extended the time needed to complete the deal until May 26 when regulatory approvals stretch.
Broadcom is still making progress in convincing regulators to sign off on the deal and expects to close the transaction this financial year, Tan said on the call.
For the first quarter ended January 29, Broadcom’s profit was $10.33 a share, excluding certain items. Revenue rose 16% to $8.92 billion. Analysts had predicted earnings of $10.16 a share and revenue of $8.9 billion.
The company’s chip business posted $7.1 billion in revenue for the quarter, up 21% from a year ago. That beats some estimates. Infrastructure software fell 1% to $1.8 billion and fell short of expectations.
The company has been reporting year-over-year revenue growth for nearly a decade.
The chip industry has enjoyed a massive boom during the pandemic, as the trend of working from home fuels demand for the technology. In the long run, Tan has said that the market will return to annual growth of about 5% or less – with a more cautious outlook than many of his peers.
Most read from Bloomberg Businessweek
©2023 Bloomberg LP
