March 4 (Reuters) - Chip designer Broadcom forecast second-quarter revenue above Wall Street estimates on Wednesday, a sign of strong demand for advanced chips used in data centers powering artificial intelligence applications.
It also announced a new share repurchase program of up to $10 billion through the end of the year.
Big Tech firms such as Alphabet, Microsoft, Amazon and Meta are expected to spend at least $630 billion to build AI infrastructure this year, which would boost demand for chips, servers, storage and networking equipment from companies like Broadcom.
"Our AI revenue growth is accelerating, and we expect AI semiconductor revenue to be $10.7 billion in Q2," CEO Hock Tan said in a statement.
The company expects quarterly revenue to be about $22.0 billion, above analysts' average estimate of $20.56 billion, according to data compiled by LSEG.
Broadcom said last month that it expects to sell at least 1 million chips by 2027 based on its stacked design tech, marking a new product and a sales target that could represent a revenue stream potentially worth billions of dollars.
Growth in Broadcom's infrastructure software segment slowed down to around 1% at $6.80 billion in the first quarter, compared with analysts' expectations of 2.6% growth to $6.88 billion.
Shares of Broadcom were up 2.9% in extended trading. The stock has fallen around 8% so far this year. It had risen around 49% in 2025.
Broadcom shares rally on custom AI chip demand
Last month, AI chip heavyweight Nvidia posted better-than-expected results for the January quarter, and forecast current-quarter revenue above market estimates. But that did not avert a selloff as investors remained concerned about an AI spending bubble and shareholder returns.
Broadcom said its first-quarter revenue rose 29% to $19.31 billion, beating analysts' average estimate of $19.18 billion. Its adjusted earnings per share of $2.05 exceeded estimates of $2.03.
Its AI revenue more than doubled to $8.4 billion in the quarter ended February 1, driven by custom AI accelerators and AI networking.
"I believe investors will gravitate toward the stock, because regardless of which software companies win the AI race, they are all investing in Broadcom's networking chips and custom accelerators," said Andrew Rocco, stock strategist at Zacks Investment Research.
The company, which supplies semiconductors and infrastructure software, does not typically design entire AI chips itself and works with companies such as Google for its tensor processing units and ChatGPT maker OpenAI for its in-house custom processors.
Broadcom engineers then help translate an early design into the physical layout of a chip that can be fabricated by manufacturers like TSMC.
Comments