Despite posting 143% year-over-year AI revenue growth, Broadcom's third-quarter guidance missed Wall Street's lofty expectations, triggering a massive sell-off.
Broadcom just reported a quarter where its AI semiconductor revenue surged 143% year over year to $10.8 billion. The reward for that performance? A stock drop of more than 13% in after-hours trading, erasing over $250 billion in market value.
What actually happened #
Broadcom posted fiscal second-quarter 2026 results on June 3, delivering overall revenue of $22.19 billion. The AI semiconductor segment came in at $10.8 billion, slightly beating the company’s own internal guidance.
The company projected third-quarter AI chip revenue of $16 billion. Wall Street consensus estimates had ranged from roughly $16.36 billion to $17.2 billion. Broadcom’s forecast missed the low end of analyst expectations.
Shares dropped 13% to 15% in after-hours trading on June 3 and 4, with the last comparable decline occurring in January 2025. A $16 billion quarterly AI revenue forecast would represent roughly a 48% jump from the $10.8 billion just reported.
The expectations game #
CEO Hock Tan highlighted demand from Anthropic, Google, Meta, and OpenAI. Tan also reiterated the company’s long-term target of surpassing $100 billion in AI semiconductor revenue by 2027, which would require sustaining roughly $25 billion per quarter. The company also disclosed plans to ship more than 10 gigawatts of AI compute capacity in 2027, with growth expected to continue into 2028.
Why this matters beyond Broadcom #
Broadcom is one of the primary suppliers of custom AI accelerators that hyperscalers use instead of or alongside Nvidia’s GPUs. The $250 billion in market value that evaporated raises questions about whether the broader AI infrastructure buildout is proceeding at the pace the market has been pricing in.
Broadcom’s forecast was roughly $360 million to $1.2 billion below analyst expectations, depending on which estimate you use. That gap amounts to roughly 2% to 7% of the forecasted figure. The stock moved 13% or more.
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