Broadcom, the semiconductor and software company, reported its financial results for the fiscal third quarter, ending July 30. Despite slightly exceeding Street expectations, the company's shares are experiencing a decline in late trading.

Financial Details

Broadcom's revenue for the third quarter reached $8.876 billion, reflecting a 5% increase from the previous year. This figure aligns closely with both the Street consensus and the company's own guidance of $8.85 billion. On an adjusted basis, Broadcom earned $10.54 per share in the quarter, slightly surpassing the consensus of $10.43 per share.

Driving Factors

CEO Hock Tan attributed Broadcom's third-quarter success to the growing demand for next-generation networking technologies. Hyperscale customers are expanding their AI clusters within data centers, which has contributed to the company's positive results. Tan states, "Our fourth-quarter outlook projects year-over-year growth, reflecting continued leadership in networking for generative AI."

Fourth Quarter Projection

For the fiscal fourth quarter, Broadcom expects revenue of $9.27 billion, a 4% increase compared to the previous year. This projection aligns with Street estimates.

Adjusted Ebitda and Free Cash Flow

Broadcom's adjusted Ebitda for the quarter was $5.8 billion, an 8% increase from the previous year. Additionally, the company reported a free cash flow of $4.6 billion, up by 7% compared to the same period last year. During the quarter, Broadcom repurchased $2.2 billion worth of common stock.

Potential as an AI Play

Broadcom is widely recognized as a potential player in the growth of AI. However, investors were anticipating clearer signs that this trend is materially impacting the company's financial results.

Market Reaction

In after-hours trading, Broadcom shares have dropped by 3.1% to $894, effectively reversing the similar gain witnessed during Thursday's regular session.

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