Broadcom Stock Falls 6% After Missing AI Forecast, June 03

Broadcom reported fiscal Q2 earnings that beat profit expectations but missed revenue forecasts, sending the stock down 6% in extended trading. CEO Hock Tan declined to raise the company’s full-year AI chip sales target to $100 billion, disappointing investors who expected higher guidance given strong demand. The chipmaker reported adjusted earnings of $2.44 per share versus $2.40 expected, but revenue of $22.19 billion fell short of $22.27 billion consensus.

Earnings Beat on Profit, Miss on Revenue

Broadcom reported adjusted earnings per share of $2.44, beating the $2.40 consensus estimate. However, revenue of $22.19 billion missed Wall Street’s $22.27 billion expectation. Net income surged 88% to $9.31 billion, or $1.91 per share, compared to $4.97 billion a year earlier. The company forecast next quarter revenue at $29.4 billion, exceeding analyst estimates of $28.53 billion.

AI Sales Growth Slows Investor Enthusiasm

AI semiconductor revenue jumped 143% year-over-year to $10.8 billion, representing 49% of total sales. Broadcom’s AI bookings exceeded $30 billion, showing strong future demand. However, CEO Tan did not raise the full-year AI sales guidance above $100 billion, disappointing investors who expected a higher target. The company reiterated its AI semiconductor revenue guidance to exceed $100 billion for 2026.

Custom Chip Demand Drives Growth

Broadcom serves six core custom AI chip customers including Anthropic, Google, Meta, and OpenAI. Revenue climbed 48% to $22.19 billion from $15 billion a year earlier. Semiconductor Solutions revenue reached $15 billion, up 79% year-over-year and representing 68% of total revenue. Infrastructure software revenue grew 9% to $7.2 billion. Operating margins hit all-time highs at 67%, up 200 basis points year-over-year.

Stock Performance and Valuation Concerns

Broadcom shares fell approximately 6% in after-hours trading despite the beat-and-raise report. The stock has climbed 40% year-to-date and 86% over the past year. Meyka rates the stock a B with a neutral recommendation, citing a high PE ratio of 93.05 and elevated valuation multiples. Analyst consensus remains strong with 43 buy ratings and only 1 hold rating.

Final Thoughts

Broadcom beat earnings but disappointed on AI guidance, sending the stock down 6%. With Meyka rating it a B and analysts maintaining buy ratings, the market reaction reflects high expectations already priced into the stock’s 40% year-to-date gain.

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