Broadcom Stock Crashes 14% as AI Chip Forecast Disappoints, June 04

Broadcom shares fell 14% in after-hours trading on June 3 after the chipmaker reported Q2 results that missed investor expectations on AI revenue guidance. While the company posted record revenue of $22.19 billion and AI semiconductor sales surged 143% year-over-year to $10.8 billion, management declined to raise its full-year AI revenue target. The stock decline signals how high expectations have climbed for AI chip suppliers.

The Earnings Beat That Felt Like a Miss

Broadcom reported Q2 revenue of $22.19 billion, slightly above the $22.13 billion analyst estimate, and adjusted earnings per share of $2.44, topping the $2.39 forecast. Yet the market sold off sharply. The real disappointment came from guidance. CEO Hock Tan projected Q3 AI chip revenue of $16 billion, falling short of the $17.2 billion analysts expected. The company also refused to raise its 2026 AI semiconductor sales forecast, keeping it at $56 billion instead of the $57.6 billion consensus.

AI Growth Remains Explosive Despite Guidance Miss

AI semiconductor revenue jumped 143% year-over-year in Q2 to $10.8 billion, marking the 13th consecutive quarter of AI-driven growth. Total Q2 revenue climbed 48% year-over-year to $22.19 billion. Net income surged 88% to $9.31 billion, and free cash flow reached $10.26 billion, representing 46% of revenue. Broadcom expects AI chip revenue to grow over 200% year-over-year in Q3 to $16 billion. The company has over $30 billion in AI bookings against just $10.8 billion shipped, with visibility extending to 2028.

Why the Market Rejected Strong Results

Broadcom stock had rallied nearly 40% this year before earnings, setting an extremely high bar. Analysts at multiple firms raised concerns that the company did not raise its full-year AI target despite accelerating demand. When a stock is priced for perfection, holding steady feels like bad news. The infrastructure software unit, built around VMware, brought in $7.18 billion, missing the $7.32 billion estimate. This combination triggered the sharp selloff.

What This Means for the Stock

Meyka rates AVGO a B with a neutral recommendation, reflecting elevated valuation metrics. The stock trades at 93x trailing earnings and 33.6x sales, well above historical averages. With analyst consensus at Buy and a $487 price target, the data suggests limited upside from the current $479.23 level. The RSI at 73.88 signals overbought conditions, indicating potential for further pullback before stabilization.

Final Thoughts

Broadcom’s fundamentals remain strong, but the stock faces valuation pressure after a 40% rally this year. The miss on AI guidance and unchanged full-year target disappointed a market pricing in perfection. Investors should wait for a better entry point.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.