Broadcom (NASDAQ:AVGO) has provided a fourth-quarter revenue forecast that slightly misses Wall Street expectations. This prediction is attributed to concerns over lackluster enterprise spending and intense competition within the networking chip sector, which could potentially overshadow the advantages stemming from increased demand for artificial intelligence-related products. Consequently, the company’s stock saw a decline of 3.4% in extended trading.

Softness in enterprise demand, combined with a slower-than-anticipated recovery in consumer electronics markets, particularly in smartphones, has adversely impacted Broadcom’s semiconductor business. The broader software industry is grappling with reduced IT budgets across enteBroadcom’s Q4 Revenue Outlook Falls Short of Expectationsrprises in both the United States and Europe, affecting Broadcom’s software portfolio as well.

Despite introducing new networking products tailored for AI workloads, Broadcom faces mounting competition from alternatives to ethernet chips, such as those offered by Nvidia (NASDAQ:NVDA) and InfiniBand, as well as from companies like Marvell Technology (NASDAQ:MRVL). This heightened competition poses challenges to Broadcom’s growth prospects.

Broadcom’s less optimistic outlook can be attributed to its exposure to traditional compute servers, where demand is weakening due to AI servers “cannibalizing” this segment, according to Kinngai Chan, an analyst at Summit Insights Group. Chan also noted that demand in storage networking and broadband access markets remains inconsistent.

For the current quarter, Broadcom anticipates revenue to reach approximately $9.27 billion, slightly below the average analyst expectation of $9.28 billion, as reported by Refinitiv data. In the third quarter, the company reported revenue of $8.88 billion, slightly surpassing analysts’ expectations of $8.86 billion. Excluding exceptional items, Broadcom posted earnings of $10.54 per share for the quarter ending on July 30, which exceeded estimates of $10.42.

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