Key Takeaways
- Broadcom shares plunged 12.6% on June 4 following underwhelming AI revenue projections
- Fiscal Q2 results topped expectations with adjusted EPS of $2.44 and $22.19 billion in revenue
- Artificial intelligence revenue surged to $10.8 billion in Q2, more than doubling from last year
- The company maintained its fiscal 2027 AI semiconductor revenue forecast above $100 billion without raising it
- Citi reaffirmed its Buy rating while Erste Group elevated AVGO to Buy from Hold on June 5
Broadcom (AVGO) experienced a sharp 12.6% decline on June 4 following its fiscal second-quarter earnings release, which failed to deliver the aggressive AI revenue outlook some market participants anticipated.
The selloff occurred even though the semiconductor giant exceeded Wall Street’s projections across key metrics. The company delivered adjusted earnings per share of $2.44, surpassing the consensus estimate of $2.40, while revenue reached $22.19 billion against expectations of $22.27 billion.
Year-over-year revenue climbed 48% from $15 billion in the comparable period. Net income soared 88% to $9.31 billion, translating to $1.91 per share, compared with $4.97 billion in the previous year.
The disappointment centered on what Broadcom didn’t announce: an increase to its fiscal 2027 AI semiconductor revenue target exceeding $100 billion. Market participants hoping for an upward revision were left disappointed by the company’s decision to maintain its existing forecast.
Chief Executive Hock Tan highlighted that artificial intelligence revenue exceeded $10.8 billion during the quarter, representing more than a 100% increase year-over-year. Management projects AI revenue will reach $16 billion in the upcoming quarter.
Looking ahead to Q3, Broadcom forecasts total revenue of approximately $29.4 billion, surpassing the Street’s $28.53 billion estimate.
Understanding Broadcom’s AI Strategy
Broadcom’s approach to the artificial intelligence market differs substantially from Nvidia’s business model. Instead of distributing ready-made GPU products, Broadcom collaborates with clients to engineer customized AI accelerator chips tailored to their unique computational requirements.
Tan identified Anthropic, Alphabet, Meta, and OpenAI as part of its six primary AI customers. Notably, Anthropic placed approximately $10 billion in orders for AI chips during the previous year alone.
Despite the recent setback, AVGO shares remain up approximately 21% in 2026, outpacing the Nasdaq Composite’s 15.4% year-to-date advance. The stock has multiplied roughly seven times since late 2022.
How Analysts Responded
The post-earnings decline didn’t trigger widespread concern among Wall Street analysts. Citi maintained its Buy recommendation on AVGO while highlighting the importance of monitoring future artificial intelligence guidance updates.
Erste Group elevated its rating to Buy from Hold on June 5, pointing to accelerated growth relative to competitors and superior long-term opportunities.
The stock’s decline materialized one day after the earnings announcement. By June 5, at least two financial institutions had either confirmed or improved their positions on the shares.
Broadcom’s Q3 guidance calls for $16 billion in AI-related revenue, marking a significant increase from the $10.8 billion recorded in the second quarter.
The post Broadcom (AVGO) Stock: Analysts React as Shares Plunge on AI Guidance Concerns appeared first on Blockonomi.
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