Broadcom (AVGO) delivered impressive fiscal second-quarter results on Wednesday, yet the stock tumbled 6.1% in after-hours trading as forward guidance failed to meet lofty investor expectations. The chipmaker posted adjusted earnings of $2.44 per share, surpassing Wall Street’s $2.40 estimate, while revenue surged 48% year-over-year to $22.19 billion, slightly above the consensus of $22.13 billion.
The star of the report was once again artificial intelligence. AI-related revenue reached $10.8 billion, a 143% jump from the prior year, and semiconductor solutions revenue climbed 79% to $15 billion. Infrastructure software revenue rose 9% to $7.2 billion, though its share of total revenue is shrinking as AI chip growth accelerates—from 42% last year to an expected 20% by next year. Free cash flow stood at $10.3 billion, representing 46% of revenue, and cash reserves swelled to $19.6 billion from $14.2 billion in the previous quarter.
Despite the beats, the market fixated on the outlook. Broadcom guided for third-quarter revenue of approximately $29.4 billion, implying 84% year-over-year growth and topping the $28.25 billion analyst forecast. CEO Hock Tan projected AI semiconductor revenue would exceed $16 billion in Q3, up over 200% year-over-year. However, investors had hoped for an even larger beat, especially after Alphabet’s announcement of an $80 billion equity sale to fund AI capex had lifted AVGO shares 4.7% on Tuesday. Broadcom’s custom AI chip partnership with Google, now a decade old, and its relationships with five other clients—including OpenAI—underpin its ambition to hit $100 billion in AI chip sales by 2027.
Technical analysts highlighted the selloff as a retreat from overbought levels. SmartReversals noted that AVGO broke below its 20-day moving average and re-entered its Bollinger Band range, signaling weakening momentum, with the $410 volume shelf seen as crucial support. Dr. Stoxx called the pullback overdone, pointing to the stock still trading within a broader rising trend channel and support between $406 and $425. A breakdown could expose levels near $390, but if buyers defend the shelf, consolidation may follow. The stock had rocketed from under $300 in April to nearly $500 before this correction.
