The Broadcom Inc (NASDAQ: AVGO) stock price fell 4.30% after releasing the financial results for the third quarter of its 2023 financial year. The company generated revenues worth $8.9 billion, marking a 5% jump from last year when it generated revenues worth $8.5 billion.
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The company’s adjusted pretax profits surged 8% to reach $5.8 billion, representing a healthy margin of 65%. The firm also noted that its diluted earnings per common share was $7.74, slightly improving from the $7.15 recorded in Q3 2022.
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Broadcom generated free cash flows worth $4.6 billion, significantly improving from the $4.3 billion recorded in Q3 2022. The company had cash and cash equivalents of $12.06 billion, an improvement from the $11.55 billion recorded in a similar period last year.
Many analysts were looking forward to Broadcom’s earnings report to gauge whether the euphoria around AI stocks is fading. The decline in the company’s share price after releasing its Q3 report indicates that investors are recalibrating their expectations of companies operating in the AI industry.
The decline in the AVGO stock price following the earnings report marks the end of a 10-quarter streak where the company’s share price rallied higher after releasing its quarterly earnings report. This conveys that investors are reconsidering whether they should keep buying AI stocks.
Investors' interest in buying AI stocks has recently diminished amid the uncertainty around whether the Fed will continue hiking interest rates or pause rate hikes at its meeting later this month.
Many analysts have pointed out some fatigue around the AI trade among investors. The same has affected other AI companies, including industry leader Nvidia, whose stock fell recently after its quarterly earnings results.
Broadcom shares had eroded all of yesterday’s gains at writing as investors fear the months-long AI stock rally has been overdone.
Hock Tan, President and CEO of Broadcom Inc., said: “Broadcom's third-quarter results were driven by demand for next-generation networking technologies as hyper-scale customers scale out and network their AI clusters within data centres. Our fourth quarter outlook projects year-over-year growth, reflecting continued leadership in networking for generative AI.”
Broadcom (AVGO) stock price chart.
The Broadcom (AVGO) stock price fell 4.30% to trade at $883.17, from Thursday’s closing price of $922.89.
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