Broadcom (NASDAQ:AVGO) shares surged in premarket trading on Friday following reports of its collaboration with ChatGPT creator OpenAI, coupled with the company’s robust guidance for the current quarter.
As of 04:15 ET, Broadcom Inc was trading up 7% in premarket activity.
For the quarter ending August 3, Broadcom reported adjusted earnings per share (EPS) of $1.69 on revenue of $15.95 billion, surpassing analyst expectations of $1.66 EPS and $15.82 billion in revenue, according to a survey by Investing.com.
Revenue from its semiconductor solutions division, which includes its custom chips business, rose 57% year-on-year to $9.17 billion. Meanwhile, the infrastructure software segment, encompassing cloud computing firm VMware, saw sales increase 17% to $6.79 billion.
For Q4, Broadcom anticipates revenue of approximately $17.4 billion, above analyst forecasts of $17.01 billion. The company also expects AI semiconductor revenue to accelerate to $6.2 billion in Q4, surpassing the roughly $6 billion predicted by analysts.
On Friday, the Financial Times reported that OpenAI plans to release its first in-house AI chip next year, aiming to address soaring computing demands and reduce reliance on Nvidia (NASDAQ:NVDA). The chip is being developed in collaboration with Broadcom and is expected to begin shipping in 2026. Broadcom CEO Hock Tan had previously mentioned a new customer committing $10 billion in orders without disclosing the company’s name.
This initiative follows a trend set by Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), and Meta (NASDAQ:META), all of which have developed custom chips to handle AI workloads. According to the report, OpenAI plans to use the chips internally rather than offering them to external customers.
Commenting on the results, Morgan Stanley analysts said, “upside to overall numbers is modest, but AI stays strong.” They added, “More importantly, the company is putting a 4th AI customer into backlog, with the surprising forecast of $10 bn of incremental second-half revenue.”
Separately, Barclays analyst Tom O’Malley noted that Broadcom “is firing on all cylinders with clear line of sight for growth supported by significant backlog.”
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