Broadcom Shares Drop 15% After Record Q2 Earnings

Q: With profits doubling, why did Broadcom’s AI forecast cause its stock to plummet 15%?

Broadcom’s stock fell because investors were not reacting to the past quarter’s profit surge; they were reacting to guidance that failed to clear an exceptionally high AI bar. The company posted a strong quarter, with profit nearly doubling and AI semiconductor revenue jumping sharply. But the market focused on what comes next. Broadcom’s forecast for third-quarter AI chip sales was about $16 billion, below the roughly $17.2 billion analysts had expected. It also did not raise its longer-term AI revenue target, instead reiterating its goal of more than $100 billion in AI chip sales by 2027. For a stock that had already rallied heavily on AI optimism, that looked like a slowdown in momentum. There were also smaller but important misses in the broader results. Total revenue came in slightly below consensus, and infrastructure software revenue missed expectations as well. That reinforced the view that the report was good, but not strong enough for a company priced for near-perfect execution. Investors were also unsettled by CEO Hock Tan’s indication that Broadcom would focus on selling “chips only” rather than complete AI systems, which may limit how much value it captures from the AI buildout. The selloff was amplified by broader market conditions. Tech valuations were already stretched, Treasury yields were rising, and semiconductor stocks were under pressure. In that environment, even a modest guidance miss was enough to trigger a sharp “sell-the-news” reaction.

3 articles · Updated · Seeking Alpha · Jun 24

Broadcom stock fell about 15% the day after the chipmaker reported a record fiscal second quarter, despite profit nearly doubling and revenue growth accelerating to its fastest pace in years.
That selloff came even as the results pointed to strong operating momentum, creating a sharp disconnect between headline performance and the market’s immediate reaction.
The move suggests investors had set an exceptionally high bar for Broadcom after its run-up, leaving record earnings and faster growth insufficient to support the shares.
The drop underscores how richly valued AI-linked semiconductor names can still fall hard when results, though strong, fail to exceed elevated expectations by enough.