Broadcom misses Q2 revenue estimates, shares drop over 13%
Despite 143% AI chip revenue growth, Broadcom's guidance fell short of Wall Street expectations, dragging down the broader semiconductor sector.
Broadcom shares tumbled nearly 13% on Thursday after the chipmaker’s AI growth failed to clear Wall Street’s increasingly unforgiving expectations.
The company reported fiscal second quarter revenue of $22.19 billion, up 48% from $15 billion a year earlier but slightly below analyst estimates of about $22.27 billion. The miss was small, roughly $80 million on a $22 billion top line, but it was enough to trigger a sharp selloff in one of the market’s biggest AI winners.
Broadcom’s AI semiconductor revenue surged 143% year over year to $10.8 billion, driven by demand for custom AI accelerators and networking chips. Adjusted earnings came in at $2.44 per share, above consensus estimates, while GAAP net income reached $9.31 billion.
Still, investors focused on guidance. Broadcom forecast third quarter revenue of about $29.4 billion and said AI semiconductor revenue would reach $16 billion next quarter, implying growth of more than 200% from a year earlier.
That would normally be a blowout outlook. This time, it landed below some investor expectations, which had moved closer to the $16.36 billion to $17.2 billion range.
CEO Hock Tan also kept Broadcom’s longer term AI sales forecast unchanged at more than $100 billion for fiscal 2027. That disappointed investors who were looking for an upward revision after months of optimism around custom AI silicon demand.
The reaction shows how high the bar has become for AI exposed chipmakers. Broadcom is not struggling to grow. It is struggling to grow fast enough to justify a rally that had already priced in near perfect execution.
The company has become one of the main beneficiaries of hyperscaler demand for custom AI chips, including ASICs designed for large cloud and AI companies. Its customer base includes major technology firms building their own AI infrastructure as an alternative or complement to Nvidia’s GPUs.
That strength also creates concentration risk. Investors are watching whether major customers such as Google continue relying heavily on Broadcom or seek to diversify suppliers as AI infrastructure spending expands. Any sign that hyperscalers want more optionality could pressure the stock, even if current demand remains strong.
The selloff also weighed on the broader AI chip trade, with other semiconductor names falling as traders reassessed whether AI hardware valuations have moved too far ahead of near term guidance.