Wall Street punished two of the biggest names in AI infrastructure on Wednesday and Thursday, underscoring how much growth has already been priced into the sector. Palo Alto Networks (PANW) and Broadcom (AVGO) each reported blockbuster quarters fueled by surging artificial intelligence demand, yet both stocks suffered sharp declines.
Palo Alto Networks released its fiscal third-quarter results on Wednesday. Revenue jumped 31% year-over-year to $3 billion, beating analyst estimates of $2.94 billion. Adjusted earnings of 85 cents per share also topped the expected 80 cents. The cybersecurity firm raised its full-year revenue guidance to $11.42–$11.43 billion and projected Q4 revenue above estimates. However, investors fixated on the fact that organic revenue growth was only 14% after stripping out contributions from acquisitions like CyberArk and Chronosphere, which added roughly $388 million to the quarter. The stock fell about 4% on Wednesday.
Broadcom then reported its fiscal second-quarter numbers after the close on Thursday, posting record revenue of $22.2 billion, up 48% year-over-year, and record free cash flow exceeding $10 billion. AI semiconductor revenue soared 143% to $10.8 billion. Yet the stock plunged more than 13% in extended trading. The disappointment stemmed not from weak results, but from management refraining from raising its long-term AI revenue target of over $100 billion by 2027 and from the absence of a new hyperscaler customer announcement.
Both reactions highlight a market that has already embedded an aggressive AI growth narrative into valuations. Analysts broadly maintained positive ratings and even raised price targets—Jefferies, Wells Fargo, and Susquehanna all lifted their targets for Broadcom—but acknowledged the valuation correction. The sell-offs do not signal a breakdown in AI demand; instead, they show that merely meeting already-high expectations is no longer enough for these bellwethers.
