SAN JOSE: Broadcom forecast fourth-quarter revenue slightly below Wall Street estimates on Thursday (Aug 31), on worries bleak enterprise spending and stiff competition in the networking chip space will outweigh benefits from a boom in artificial intelligence-led demand.

Shares of the San Jose, California-based company fell 3.4% in extended trading.

Soft enterprise demand, coupled with slower-than-expected recovery in consumer electronics markets such as smartphones, has also taken a toll on Broadcom’s semiconductor business.

The entire software industry is feeling the pain of slashed IT budgets across enterprises, both in the US and Europe. Broadcom’s software portfolio has also been impacted by the same.

Even as the company has introduced new networking products to suit AI workloads, competition is rising from Nvidia’s alternative to ethernet chips, InfiniBand and companies like Marvell Technology.

Broadcom’s weak outlook reflects its exposure to traditional compute servers, where demand is feeble as it is being “cannibalised” by AI servers, said Summit Insights Group analyst Kinngai Chan.

“Demand is very mixed in the storage networking and broadband access markets,” he added.

The chip company expects current-quarter revenue to be about US$9.27 billion. Analysts on average expect revenue to be US$9.28 billion, according to Refinitiv data.

Revenue in the third quarter was US$8.88 billion. Analysts polled by Refinitiv expected revenue of US$8.86 billion.

Excluding items, the company earned US$10.54 per share in the quarter ended July 30, above estimates of US$10.42. – Reuters