Broadcom shares slide after revenue outlook fails to meet top-end expectations

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Ashutosh Sureka

16 hours ago

Broadcom shares slide after revenue outlook fails to meet top-end expectations — Broadcom drops after forecast

A sharp sell-off in Broadcom after-hours trading punctures part of the recent rally in U.S. semiconductor stocks tied to artificial intelligence spending. The drop wipes out more than $250 billion in market value even though the company’s quarterly revenue guidance comes in above consensus forecasts.

Highlights

Broadcom shares drop up to 15% in after-hours trading, erasing over $250 billion in market value after current-quarter revenue guidance of $29.4 billion disappoints bullish investors.
Second-quarter chip revenue reaches $15 billion, narrowly topping analyst expectations, while full revenue aligns with the $22.2 billion consensus forecast.
Investors react negatively despite CEO Hock Tan reaffirming over $100 billion in 2027 AI chip revenue targets, seeking higher long-term growth projections amid surging AI infrastructure spending.

Revenue outlook triggers market backlash

As reported by Financial Times, Broadcom loses more than $250 billion in market value in after-hours trading on Wednesday after issuing current-quarter revenue guidance of $29.4 billion, above the $28.2 billion consensus estimate compiled by Visible Alpha but below investors' most optimistic projections.

The stock falls as much as 15% after the chipmaker, now valued at about $2.3 trillion before the after-hours move, signals AI-related growth that does not satisfy expectations built up during a strong recent run in semiconductor shares. Broadcom’s stock had risen more than 14% over the past week, rebounding from a late-March slump as investors pour into companies seen as beneficiaries of heavy AI infrastructure spending.

Broadcom reports second-quarter chip revenue of $15 billion, only modestly ahead of the $14.8 billion analysts expected, while total second-quarter revenue is in line with consensus forecasts of $22.2 billion. Chief executive Hock Tan reiterates his March projection that Broadcom can generate well over $100 billion in AI chip revenue in 2027, but investors appear to be looking for a higher long-term target.

Daniel Newman, chief executive of market intelligence firm The Futurum Group, says Broadcom delivers another strong quarter but the market reaction reflects a pattern of investors buying ahead of earnings and then selling on the news. He adds that investors likely want Tan to indicate that the company’s 2027 AI chip opportunity is meaningfully larger than the $100 billion figure already outlined.

AI chip rally faces scrutiny

Broadcom has become a major participant in the expanding AI infrastructure market, competing with Nvidia and AMD in advanced semiconductors used to train and run AI models. Over the past year, it has named a growing roster of custom AI chip customers including Google, Meta, OpenAI and Anthropic.

The broader backdrop is a historic surge in U.S. chip stocks. The Philadelphia Semiconductor Index, which tracks 30 of the largest U.S.-listed chipmakers, has added more than $5 trillion in market value over the past two months as investors bet on a multiyear spending boom in AI infrastructure.

That optimism is also drawing attention to whether large technology groups can sustain their pace of investment. Google recently launches a record $85 billion equity raising to support its infrastructure plans, marking its first stock offering in more than two decades and the largest such deal on record.

In our earlier article on the market’s focus on Broadcom’s earnings and options positioning, we explained why the chipmaker’s results were seen as a key near-term test for the durability of the recent S&P 500 rally. We noted that options markets were pricing in an unusually large post-earnings move and that heavy call activity signaled elevated expectations going into the report.

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