Broadcom Posts Loss in Q3 Due to Acquisition-Related Costs
Broadcom (AVGO) shares fell after the closing bell Thursday, sliding following quarterly results that swung to a loss due to increased merger-related expenses. The semiconductor manufacturing company posted a net loss of $1.875 billion, compared to a profit of $3.3 billion in the year-ago quarter. Adjusting for $1.5 billion in amortization of acquisition-related intangible assets and other restructuring costs, Broadcom’s earnings were $1.24 per share.
Integration of VMware
Broadcom acquired software firm VMware in November 2023. CEO Hock Tan said the company expected full-year AI revenue to be $12 billion, “driven by ethernet networking and custom accelerators for AI data centers.” The company is continuing to integrate VMware, and its third-quarter results reflect continued strength in their artificial intelligence semiconductor solutions and VMware.
Fiscal Fourth-Quarter Guidance
The company projected fiscal fourth-quarter revenue of $14 billion, which fell slightly short of the analyst consensus. Despite the loss in the third quarter, Broadcom remains optimistic about its future performance. However, the guidance miss caused shares of Broadcom to slip more than 6% in after-hours trading. Despite this, the stock has risen substantially this year, climbing approximately 40%.
Investor Reaction
The news of Broadcom’s loss and guidance miss had an immediate impact on its stock price. After the earnings report, shares of Broadcom fell in after-hours trading. Investors were disappointed by the loss and the slightly lower-than-expected revenue projection for the fourth quarter. However, it is important to note that Broadcom’s stock has performed well throughout the year, with a significant increase in value.
Reasons for the Loss
The primary reason for Broadcom’s loss in the third quarter was the increased merger-related expenses. The company incurred $1.5 billion in amortization of acquisition-related intangible assets and other restructuring costs. These costs significantly impacted the company’s financial performance for the quarter. However, when adjusted for these expenses, Broadcom’s earnings were $1.24 per share, which indicates that the underlying business is still strong.
Future Outlook
Despite the loss and guidance miss, Broadcom remains optimistic about its future performance. The company expects full-year AI revenue to be $12 billion, driven by ethernet networking and custom accelerators for AI data centers. This indicates that Broadcom’s artificial intelligence semiconductor solutions and VMware integration are expected to contribute significantly to its revenue growth.
Furthermore, Broadcom’s stock has performed well throughout the year, with a substantial increase in value. This indicates that investors have confidence in the company’s long-term prospects. While the loss in the third quarter is a setback, it does not necessarily reflect the overall health of the business.
Conclusion
Broadcom’s third-quarter results, which swung to a loss due to increased merger-related expenses, disappointed investors. The company posted a net loss of $1.875 billion, compared to a profit of $3.3 billion in the year-ago quarter. However, when adjusted for these expenses, Broadcom’s earnings were $1.24 per share, indicating that the underlying business is still strong.
Despite the loss, Broadcom remains optimistic about its future performance. The company expects full-year AI revenue to be $12 billion, driven by ethernet networking and custom accelerators for AI data centers. Additionally, Broadcom’s stock has performed well throughout the year, indicating that investors have confidence in the company’s long-term prospects.
While the loss in the third quarter is a setback, it does not necessarily reflect the overall health of the business. Broadcom’s ongoing integration of VMware and its strong artificial intelligence semiconductor solutions position the company for future growth and success.
Sources:
Investopedia
