Broadcom Shares Slide Amid Post-Earnings Selloff
Shares of Broadcom (AVGO) fell 4.9% in morning trading, down to $398.51, as a two-day post-earnings selloff continued following the company’s fiscal second-quarter results released after the close on June 3. While the quarter delivered record revenue of $22.19 billion, up 48% year-over-year, and adjusted EPS of $2.44, surpassing the $2.40 consensus, investor concerns centered on forward guidance rather than the actual results.
AI Chip Revenue Guidance Disappoints
Investors were rattled by Broadcom’s Q3 AI chip revenue guidance of $16 billion, about $1.2 billion below analyst expectations, and CEO Hock Tan’s decision to reiterate rather than raise the long-term AI semiconductor revenue target. Tan stated on the earnings call, “We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion,” signaling a lack of acceleration. Additionally, infrastructure software revenue of $7.18 billion missed the $7.32 billion analyst consensus, and Broadcom indicated a shift to a “chips only” model, moving away from integrated AI systems.
Analyst Reactions and Sector Impact
Analyst responses were mixed but generally constructive for the long-term thesis. Jefferies raised its price target to $550 from $500 while maintaining a buy rating, and KeyBanc increased its target to $575, keeping an overweight rating. Macquarie was a notable outlier, downgrading Broadcom to Neutral. The broader semiconductor sector also felt pressure, with peer chipmakers declining during the session, alongside a NASDAQ drop of 1.9% and an S&P 500 decline of 1.0%, influenced by geopolitical tensions following the rejection of a U.S.-brokered ceasefire in the Middle East.
Market Reaction and Valuation Implications
The combination of a guidance miss for AI chip revenue, a reiterated long-term target rather than an increase, and a risk-off macro environment created a perfect storm for continued selling. Broadcom is now trading nearly 20% below its 52-week high of $495, prompting the market to recalibrate expectations for the company’s AI revenue growth trajectory going forward.
