Broadcom Stocks Dip 15% Despite Record Revenue: AI Concerns Arise
Chipmaker Broadcom Inc. experienced a significant stock decline of approximately 15% on Thursday. This occurred despite the company reporting record second-quarter revenue. The reason? The company’s artificial intelligence (AI) chip revenue fell short of Wall Street’s high expectations.
Broadcom reported a fiscal second-quarter revenue of $22.19 billion. This represents a 48% year-over-year increase. However, it fell short of the analyst consensus estimate of $22.27 billion. This marked the first revenue miss since December 2024, breaking a streak of quarters where the company consistently exceeded forecasts. The company also posted non-GAAP earnings of $2.44 per share, slightly beating the $2.40 estimate. Additionally, it generated $10.26 billion in free cash flow at a 46% margin.
The stock decline was primarily driven by concerns about AI semiconductor revenue growth. This came in at $10.8 billion, up 143% year-over-year but below investor expectations. More significantly, CEO Hock Tan declined to raise the company’s full-year AI chip sales guidance beyond the current $100 billion forecast range. This disappointed investors who had anticipated more aggressive projections. For the third quarter, Broadcom guided to approximately $29.4 billion in total revenue. This is above the Street’s $28.53 billion estimate, with AI semiconductor revenue expected to exceed $16 billion. This represents over 200% year-over-year growth.
The market reaction reflects the high expectations placed on companies at the forefront of the AI infrastructure boom. Broadcom has become a major beneficiary of artificial intelligence spending, helping cloud providers and technology firms design custom AI processors. Despite the stock decline, shares remain up approximately 38% year-to-date and have increased ninefold since the end of 2022 amid strong demand for AI chips.
Source: CNBC Market Updates