Broadcom Shares Fall After Q2 Revenue Miss and Unchanged AI Guidance

Broadcom has reported its fiscal second-quarter earnings, revealing a complex financial picture defined by massive AI growth and slight revenue misses. While the company saw a significant surge in net income, its overall revenue of $22.19 billion fell just short of the $22.27 billion estimated by LSEG consensus.

Despite the revenue miss, adjusted earnings per share reached $2.44, surpassing the $2.40 estimate. Net income climbed 88% to $9.31 billion, or $1.91 per share, compared to $4.97 billion, or $1.03 per share, in the same quarter last year.

The AI Growth Engine

The company’s growth is being heavily driven by demand for custom AI chips, including Google’s tensor processing unit. AI revenue more than doubled on an annual basis to $10.8 billion during the second quarter.

CEO Hock Tan identified six core custom chip customers fueling this expansion, specifically naming Google, Meta, OpenAI, and Anthropic. In December, Tan noted that Anthropic had placed an order for $10 billion in AI chips.

Did You Know? Broadcom’s stock has multiplied almost ninefold since the end of 2022, a period coinciding with the start of the generative AI boom sparked by ChatGPT.

Market Reaction and Guidance

Despite a 48% increase in revenue from $15 billion a year earlier, Broadcom’s stock slid in extended trading. Investors reacted to CEO Hock Tan’s decision not to raise the company’s full-year target of $100 billion in AI chip sales.

“We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion,” Tan stated during an earnings call.

Expert Insight: Samantha Carter notes that Broadcom is operating under an intense microscope where even a slight revenue miss or stagnant guidance can trigger volatility. The stakes are high as the company balances the rapid scaling of custom AI silicon against the integration of its VMware software acquisitions.

Segment Performance: Chips vs. Software

The semiconductor solutions division, which includes Wi-Fi chips and networking parts, reported $15.1 billion in revenue. This figure exceeded the StreetAccount estimate of $14.72 billion.

How Hock Tan Turned Broadcom Into Nvidia’s Nightmare

Conversely, infrastructure software revenue—bolstered by the 2023 purchase of VMware—reached $7.18 billion. While this represents a 9% annual increase, it fell short of the $7.32 billion expected by analysts.

Potential Future Outlook

Broadcom’s immediate trajectory may be defined by its ambitious short-term projections. The company expects revenue this quarter to be approximately $29.4 billion, which would top Wall Street’s expectation of $28.53 billion.

AI revenue is likely to see a sharp increase, as Tan expects it to triple in the current quarter to $16 billion. The company may continue to rely on its six core custom chip customers to sustain this momentum toward its 2026 targets.

Frequently Asked Questions

Who are Broadcom’s primary AI chip customers?
Broadcom has six core custom chip customers, which include Google, Meta, OpenAI, and Anthropic.

How has Broadcom’s stock performed recently?
Broadcom shares have risen nearly 40% this year as of Wednesday’s close and have increased almost ninefold since the end of 2022.

What is the company’s long-term AI revenue target?
CEO Hock Tan has reiterated guidance for AI semiconductor revenue to be in excess of $100 billion by fiscal year 2027.

Do you believe the demand for custom AI chips will continue to outweigh the volatility in enterprise software revenue?