Semiconductor giant Broadcom saw its shares decline in after-hours trading November 11 following a revenue forecast that, while beating expectations, signaled potential margin pressures. The company attributed the anticipated decline to an increased proportion of sales from its rapidly expanding artificial intelligence (AI) chip business, a sector requiring significant investment.Investors are closely watching BroadcomS transition as it aims to capitalize on the growing demand for AI infrastructure, including custom chips for companies like google adn networking components for data centers.
写真はブロードコムのロゴ看板。9月5日、カリフォルニア州サンノゼで撮影。REUTERS/Brittany Hosea-Small
The guidance reflects investor sensitivity to profitability and substantial investment costs as Broadcom aggressively expands its AI chip business. While the company currently has $73 billion in orders scheduled to ship over the next 18 months, it warned that margins could come under pressure.
“We are anticipating consolidated gross margins to be down approximately 100 basis points sequentially in the first quarter, primarily reflecting a higher AI revenue mix,” Chief Financial Officer Kirsten Spears said during an earnings call. She added that the company’s gross margins throughout the year will be influenced by the sales mix of infrastructure, software, and semiconductors.
Summit Insights Senior Research Analyst Kinngai Chan explained that Broadcom’s concentration of AI customers contributed to the stock’s decline, coupled with the expectation of lower future profitability in AI systems sales.
“The backlog is still concentrated with just five customers, and includes higher-priced systems. Systems sales will bring down gross margins and are expected to represent a larger percentage of overall revenue, likely through the back half of 2026,” Chan stated.
DA Davidson analyst Gil Luria suggested the margin decline could raise concerns about costs related to Taiwan Semiconductor Manufacturing (TSMC), which handles Broadcom’s semiconductor manufacturing.
Broadcom anticipates first-quarter revenue of approximately $19.1 billion, surpassing the $18.27 billion consensus estimate compiled by LSEG.
Fourth-quarter revenue, which ended November 2nd, totaled $18.02 billion, exceeding analyst expectations of $17.49 billion.
“We expect AI semiconductor revenue to double to approximately $8.2 billion in the first quarter,” said Hock Tan, Chief Executive Officer, in a statement.
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