Key Takeaways
- Shares of AVGO declined 12.6% on June 4 following underwhelming AI revenue projections
- Second quarter results exceeded expectations with adjusted EPS of $2.44 and $22.19 billion in revenue
- Artificial intelligence revenue surged past the double mark year-over-year, reaching $10.8 billion in Q2
- Company maintained its fiscal 2027 AI semiconductor revenue projection above $100 billion without raising it
- Citi retained its Buy recommendation; Erste Group elevated AVGO from Hold to Buy on June 5
Broadcom (AVGO) experienced a significant 12.6% decline on June 4 following its fiscal second quarter earnings announcement, which failed to satisfy investor expectations for more aggressive AI revenue projections.
The sharp decline occurred even though the company exceeded analyst projections on both revenue and earnings metrics. Broadcom delivered adjusted earnings per share of $2.44 compared to the anticipated $2.40, while revenue reached $22.19 billion, slightly trailing the consensus forecast of $22.27 billion.
Year-over-year revenue climbed 48% from the previous year’s $15 billion figure. Net earnings soared 88% to $9.31 billion, translating to $1.91 per diluted share, compared to $4.97 billion in the prior-year period.
The issue? Broadcom chose not to increase its ambitious AI semiconductor revenue forecast exceeding $100 billion for fiscal year 2027. Market participants anticipating an upward revision to that projection were clearly disappointed by the unchanged guidance.
Chief Executive Hock Tan highlighted that AI-related revenue more than doubled compared to the same period last year, climbing to $10.8 billion for the quarter. Looking ahead, the company projects $16 billion in AI revenue for the upcoming quarter.
For the third quarter outlook, Broadcom provided total revenue guidance of approximately $29.4 billion, surpassing analyst expectations of $28.53 billion.
Understanding Broadcom’s AI Strategy
Broadcom’s approach to the artificial intelligence market differs significantly 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 roster of six primary AI clients. Notably, Anthropic submitted an order valued at approximately $10 billion for AI semiconductor solutions during the previous year.
Despite the recent setback, shares remain elevated by approximately 21% in 2026, outpacing the Nasdaq Composite’s year-to-date advance of 15.4%. The stock has multiplied roughly sevenfold since late 2022.
Analyst Perspectives
The post-earnings selloff didn’t trigger widespread pessimism across the analyst community. Citi maintained its Buy recommendation on AVGO shares while highlighting future AI guidance as a critical monitoring point.
On June 5, Erste Group elevated its rating on Broadcom from Hold to Buy, pointing to accelerated growth relative to industry competitors and superior forward-looking potential.
The market reaction materialized the day following the earnings release. By June 5, at least two major Wall Street research firms had either reaffirmed or improved their stance on the semiconductor company.
Broadcom’s projection of $16 billion in AI revenue for Q3 would mark a substantial sequential increase from the $10.8 billion recorded in the second quarter.
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