By Arsheeya Bajwa and Zaheer Kachwala
(Reuters) -Broadcom forecast quarterly revenue above Wall Street estimates on Thursday and predicted booming demand for its custom artificial intelligence chips in the next few years.
Shares of the Palo Alto, California-based company were up 14% in aftermaket trade after CEO Hock Tan told investors on a conference call he expects a revenue opportunity from AI in the range of $60 billion to $90 billion in fiscal 2027.
Tan indicated three "hyperscale" customers are likely to deploy millions of AI chip clusters at the time.
Big tech has been vying to reduce its dependence of pricey, supply-constrained AI processors made by front-runner Nvidia, helping Broadcom (NASDAQ:AVGO) which makes advanced custom artificial intelligence chips for so-called hyperscalers.
Demand for Broadcom's networking chips that help move around vast amounts of data used by applications such as OpenAI's ChatGPT has also increased, as businesses double down on investments in GenAI infrastructure.
"Broadcom's strong performance doesn't come as a surprise. It's one of several companies benefiting from AI invigorating the global semiconductor industry, with its AI revenue growing 220% this year," said eMarketer analyst Jacob Bourne.
The company forecast revenue of about $14.6 billion for the first quarter, compared with analysts' average estimate of $14.57 billion according to data compiled by LSEG.
Analysts, however, have raised doubts about the amount of potential future business from Apple (NASDAQ:AAPL), one of Broadcom's most significant wireless customers, as the iPhone maker works to design more of its chips in-house.
Apple's plans will include switching to a homegrown chip for Bluetooth and Wi-Fi connections starting next year, replacing some parts currently provided by Broadcom, Bloomberg News reported earlier on Thursday.
Though the company faces intense competition from Nvidia's ethernet-like Infiniband products, Broadcom still benefits from the expansion of AI data centers as it is one of the largest providers of advanced networking equipment.
"Broadcom will continue to be a relevant player in the custom AI ASIC market together with companies like Marvell as tier-1 hyperscalers will continue to introduce their in-house chips," Summit Insights senior analyst Kinngai Chan said.
Application-Specific Integrated Circuit, or ASICs, are chips designed for specific tasks or applications.
While hailed as a chipmaker, Broadcom has proliferated into a tech conglomerate owing to buyouts such as its $69 billion acquisition of cloud-computing firm VMware. The infrastructure software segment grew 196% from a year earlier to $5.82 billion in the fourth quarter.
The company reported fourth-quarter revenue of $14.05 billion, a jump of over 50% from a year earlier. Analysts had expected $14.09 billion.
On an adjusted basis, Broadcom earned $1.42 per share compared with estimates of $1.38 per share.