Chipmaking giant Broadcom Inc. topped Wall Street’s estimates for its fiscal first-quarter sales today as it continued to benefit from cloud infrastructure providers upgrading their data centers to support artificial intelligence, driving demand for its networking chips.

However, the company’s stock fell slightly after-hours on somewhat disappointing guidance for the full year.

Smaller rival Marvell Technology Inc.’s stock dipped more than 7% after it issued a forecast below expectations, saying it was hit by weaker demand for chips used in AI applications.

Broadcom did not update its annual forecast of $50 billion in revenue, which is still just shy of Wall Street’s expectations, likely disappointing investors. The company’s stock fell 2% after-hours.

The company reported net income of $1.33 billion in the quarter, compared with $3.77 billion one year earlier. Earnings before certain costs such as stock compensation came to $10.99 per share, ahead of the consensus estimate of $10.40 per share. Its revenue jumped 34% from a year earlier, to $11.96 billion, beating the Street’s target of $11.8 billion.

Broadcom and Marvell both specialize in high-end networking chips that enable fast communications between computers and are therefore expected to be big beneficiaries at a time when enterprises race to grow their AI infrastructures.

Ahead of their respective earnings calls, shares of both Broadcom and Marvell were up more than 4%, hitting record highs after making big gains in the prior months. They’re benefiting from the rising demand for generative AI technology, which has sparked enterprises to increase spending on information technology infrastructure.

The complex data centers that support generative AI workloads are essentially worthless without the most advanced networking gear sold by the likes of Broadcom and Marvell. Generative AI needs more than just the graphics processing units sold by companies such as Nvidia Corp., for those chips also need to be able to communicate with one another rapidly. That has helped embed Broadcom and Marvell in technology supply chains, and both have become major beneficiaries of AI as a result.

Broadcom’s main business is in chipmaking, but its portfolio also includes software, and that side of its business has become much bigger after its acquisition of the virtualization company VMware Inc., and CA Technologies Inc. before it.

The company’s semiconductor business unit saw revenue jump 4%, to $7.39 billion, slightly trailing the Street’s consensus estimate of $7.46 billion. However, revenue from the infrastructure solutions unit came to $4.57 billion, ahead of the forecast of $4.5 billion.

Broadcom Chief Executive Hock Tan (pictured) said in a press release that strong demand for its networking products and custom AI accelerators drove growth in the semiconductor segment. “VMware is accelerating revenue growth in our infrastructure-software segment,” he added.

Marvell’s stock sags on weak guidance

Marvell also beat expectations as it delivered its fiscal fourth-quarter results, but its guidance for the first quarter of fiscal 2025 left a lot to be desired, sending its stock down more than 7% in extended trading.

The company said in November that it expected roughly half of its revenue to decline in the first quarter, due to weak demand in its wireless carrier and enterprise markets.

Despite that dire forecast, it did manage to meet the Street’s expectations in today’s report. Earnings before certain costs such as stock compensation came to 46 cents per share, in line with analysts’ projections. Revenue rose a scant 1% from a year ago, to $1.43 billion, just ahead of the $1.42 billion analyst forecast.

Marvell CEO Matt Murphy warned analysts that this weakness continues to be a problem. “While we are forecasting soft demand impacting consumer, carrier infrastructure and enterprise networking in the near term, we expect revenue declines in these end markets to be behind us after the first quarter,” he said.

Marvell’s customers, which include cloud services providers and telecommunications firms, have been working to clear excess chip inventories, after stockpiling the products during the COVID-19 pandemic. Those inventory corrections mean it’s struggling to land new orders.

The company said it’s looking for first-quarter earnings of 23 cents per share at the midpoint of its guidance, well off the Street’s target of 40 cents per share. Revenue is expected to be about $1.15 billion, plus or minus 5%, compared with estimates of $1.37 billion.

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