Broadcom Inc. (NASDAQ:AVGO) is positive on generating billions of dollars in AI revenue, but believes issues around supply chain constraints and the actual deployment of data centers remain.
Demand Still Outpaces Supply Amid AI Boom
When asked about business doubling next year but demand still outpacing it and any potential supply bottlenecks, CEO Hock Tan said on the company’s fiscal third quarter earnings call that “we’re very careful and, to be honest, we try to be conservative. So we’re giving you an outlook and, yeah, demand—we can ship significantly more.”
On Wednesday, Broadcom said that it expects AI revenue to double to $115 billion in fiscal 2027 and to double again to $230 billion in fiscal 2028, supported by secured supply lines and customer demand.
Tan went on to say that, “certainly our customers want us to ship more, but we have secured supply and we think it’s the right number to put it to 115. And if circumstances change and our ability to scale more supply change, of course we will uplift.”
Data Center Deployments Still Face Challenges
Tan also addressed other concerns related to land, power, and shell, or LPS, when it comes to data center deployments, and potential impacts on outlook.
“It’s a multidimensional issue to get an AI data center deployed. Yeah, we now are more sensitive about, especially at scale, and we are now delivering at scale to our customers. XPUs—AI data centers built upon XPU computing accelerators—land, power, and shell. As I indicated, the question with will is a big concern. It’s more than a big concern. It dictates specific timing of when this capacity gets deployed and be available,” said Tan.
Tan also talked about High-Bandwidth Memory, or HBM, chip constraints, which the company does not supply but its customers secure for their needs, as a bottleneck. “And of course we all know about memory, HBM memory, and beyond HBM memory, the system memory that goes into AI servers, which we don’t supply necessarily but our customers have to secure too. So all this is a multidimensional problem coming from various sources, and then depending on different times each might become a bottleneck,” Tan commented.
Softer Q4 Guidance Weighs on Strong Q3 Results
Broadcom reported fiscal third-quarter revenue of $29.59 billion, beating estimates of $29.36 billion, while adjusted earnings of $3.32 per share also beat estimates of $3.24 per share, according to Benzinga Pro. However, the company’s fiscal fourth quarter guidance seemed slightly underwhelming to investors, following which shares fell nearly 4% premarket on Thursday.
“$AVGO -7% AH after 3Q results beat ests but 4Q rev guidance fell slightly short of analysts’ expectations ($34.8B vs $35.0B est),” said Gary Black, Managing Partner, The Future Fund LLC, in a post on X. “As the AI Rev strength becomes clearer to investors I expect the stock to recover somewhat.”
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