Broadcom forecasts quarterly sales below estimates amid rising custom AI chip competition

AI chip sales more than tripled to $16.7 billion in the third quarter, lifting Broadcom's total revenue to $29.59 billion, which beat estimates of $29.36 billion. Adjusted profit came in at $3.32 per share, compared with estimates of $3.24.

The company's customers are also signing deals with rival firms. Last month, Marvell struck a custom chip deal with Google that could make the search giant one of its biggest investors with an up to $12.2 billion stake.

In April, Broadcom signed a long-term agreement to supply Google with future generations of custom AI chips through 2031.

Broadcom's ability to meet explosive AI demand has also been tested by a strained supply chain. To reduce its reliance on any single manufacturer, the company in July signed a multi-year memorandum of understanding with Samsung Electronics 005930.KS, worth over $200 billion.

Sept. 2 (Reuters) - Broadcom forecast quarterly revenue below Wall Street estimates on Wednesday, signaling intense competition could hamper gains from its custom processors.

Shares of the Palo Alto, California-based company fell over 3% in extended trading. They have gained about 6% this year, significantly underperforming rivals and the broader semiconductor index .SOX.

While Broadcom is a key player in the chip sector, it lags behind AI bellwether Nvidia NVDA.O, whose dominant graphics processors remain the industry standard for AI workloads.

The company expects fourth-quarter revenue of about $34.8 billion, compared with analysts' average estimate of $35.03 billion, according to data compiled by LSEG.