The computer chipmaker Broadcom Inc. posted better-than-expected financial results and offered a strong forecast for its fiscal second-quarter revenue, citing continued strong demand for its custom artificial intelligence chips.

The strong results helped to ease concerns about beaten-down AI stocks, which surfaced yesterday after fellow chipmaker Marvell Technology Inc. only just delivered to expectations and fell sharply Thursday morning. Broadcom’s stock surged more than 12% after-hours.

The company reported first-quarter earnings before certain costs such as stock compensation of $1.60 per share on revenue of $14.92 billion, up 25% from one year earlier. The numbers were better-than-expected, with Wall Street looking for earnings of just $1.51 per share on sales of $14.62 billion.

Broadcom AI chips propel strong financial performance

Broadcom’s net income rose to $5.5 billion, up from just $1.33 billion in the year-ago quarter.

In addition, the company also offered strong guidance, saying it sees second-quarter revenue of $14.9 billion at the midpoint, surpassing the Street’s target of $14.71 billion.

Broadcom Chief Executive Hock Tan (pictured) hailed the company’s record first-quarter revenue, saying it was primarily thanks to its hyperscale partners, which “continue to invest in AI accelerators and connectivity solutions for AI data centers.”

The company’s semiconductor solutions segment delivered revenue of $8.2 billion, while the infrastructure software segment, which includes VMware’s virtualization offerings, added $6.7 billion.

On a conference call with analysts, Tan said the company’s three biggest customers have been investing “aggressively” in powerful new AI models, and are racing to build 1 million-unit AI chip clusters by the end of 2027.

Prior to the report, Broadcom’s stock had fallen 6% during the regular trading session, another down day for the overall market, while Marvell continued a downward spiral that began yesterday when its results failed to impress investors, falling 20%. The broader iShares Semiconductor exchange-traded fund was also down 4%. The companies both design their own AI chips, called application-specific integrated circuits.

Besides its AI accelerators, Broadcom also sells chips for a number of other use cases, including broadband, networking, server storage, industrial and wireless applications.

The company’s results demonstrate that it’s not so much that the chipmaking sector is struggling, but rather that some chipmakers are just struggling with execution issues, said Holger Mueller of Constellation Research Inc.

“Broadcom executed very well, growing its revenue by 25% year-over-year and increasing its diversification into infrastructure, which is getting closer to generating half of its revenue,” Mueller said. “The good news is that the competition to replace VMware’s software is likely to come screeching to a halt later this year, as those who are likely to jump ship should have already done so by then. It demonstrates that Broadcom has been a good steward for VMware, despite all of the noise.”

Earlier this week, Reuters reported that Broadcom has been running manufacturing tests with Intel Corp.’s 18A manufacturing process to see if its chip fabs might be suitable for its needs. It’s said that the company is mulling whether or not to place orders worth hundreds of millions of dollars with Intel’s chip fab business. Any contracts would be a massive win for struggling Intel, whose contract manufacturing business has struggled to win over any prominent chop designer customers so far.

Photo: Sarbjeet Johal (STACKPANE)/YouTube