Key Takeaways
- Broadcom shares have declined roughly 24% from their peak of approximately $495.
- The company reported record Q2 revenue of $22.2B, with AI chip revenue soaring 143% annually to $10.8B.
- Q3 AI chip revenue forecast of around $16B disappointed investors expecting $17B or higher.
- CEO Hock Tan maintained the existing fiscal 2027 AI chip revenue target above $100B without raising it.
- Wall Street analysts stay optimistic—JPMorgan maintained its Overweight stance with a $580 price objective.
By virtually every financial metric, Broadcom delivered an exceptional fiscal second quarter. Year-over-year revenue soared 48% to reach $22.2 billion. The company posted adjusted earnings of $2.44 per share. AI semiconductor sales exploded 143% higher to $10.8 billion. Yet the stock tumbled 24% from its peak regardless.
This disconnect reveals just how elevated investor expectations had become.
The market reaction wasn’t driven by weak performance. Instead, traders punished the stock because forward guidance failed to exceed increasingly ambitious forecasts. Broadcom projected fiscal Q3 AI chip revenue near $16 billion—representing more than triple the prior-year amount—yet Wall Street had been anticipating $17 billion or beyond.
Another disappointment came when CEO Hock Tan chose not to increase the company’s longer-term AI semiconductor outlook. He reaffirmed the current projection of exceeding $100 billion in AI chip revenue by fiscal 2027. In today’s growth-hungry market, maintaining existing targets was interpreted as a warning sign.
Trading activity exploded on the day shares plunged. This wasn’t a gradual revaluation—it was an abrupt repricing.
The Reality Behind the Headlines
There’s a noteworthy discrepancy in Broadcom’s latest figures. The company delivered $10.8 billion in AI chips during the quarter. Meanwhile, Tan revealed that AI semiconductor bookings exceeded $30 billion in that identical period. Customers are placing orders at nearly three times the company’s current production capacity. This clearly isn’t a demand weakness.
Tan characterized appetite for XPUs and networking equipment as “simply insatiable.” The semiconductor giant has secured gigawatt-scale agreements with Anthropic, OpenAI, and Meta, projecting shipments surpassing 10 gigawatts of AI chips throughout 2027.
On June 24, Broadcom and OpenAI jointly unveiled their inaugural custom AI processor, dubbed the Jalapeño. Designed exclusively for inference workloads, it’s currently operational in testing environments using OpenAI’s GPT-5.3-Codex-Spark model. Tan informed Reuters the processor competes effectively with Nvidia’s Blackwell GPUs and Google’s TPUs. OpenAI intends to deploy it commercially before year’s end.
Analyst Sentiment Remains Strong
Wall Street analysts haven’t abandoned their bullish thesis. JPMorgan reaffirmed its Overweight recommendation and $580 price objective following the decline, advising clients it would be “aggressive buyers” at present valuations.
The overall analyst consensus continues leaning heavily positive—the vast majority of ratings remain at Buy, with average price objectives still exceeding $500.
Legitimate concerns do exist. CFO Kirsten Spears has highlighted potential margin compression as AI becomes a larger portion of Broadcom’s revenue mix, since certain AI system sales generate lower profitability than the software division. Tan has also recognized that Google might broaden its TPU supplier base eventually, though Broadcom remains integral to Google’s semiconductor strategy.
The selloff rippled throughout the semiconductor sector. Nvidia, AMD, Marvell, Intel, and Micron all experienced downward pressure in subsequent trading sessions, as market participants reevaluated AI-focused valuations industry-wide.
Broadcom’s Q3 AI chip guidance of roughly $16 billion, though below analyst projections, would still mark a tripling versus the comparable year-ago period.
