Broadcom shares declined 1.8% in pre-open trading after management provided fiscal fourth-quarter revenue guidance that disappointed some investors despite a quarter of generally strong operating performance.
For Q4 the company forecast revenue of approximately $34.8 billion. That figure represents a 93% year-over-year increase but landed below the analyst consensus of about $35 billion. Market participants had been expecting an even higher "whisper number" heading into the announcement, which left the outlook feeling short of the most optimistic forecasts.
Broadcom's reported third-quarter results were mostly solid. Adjusted earnings per share were $3.32, compared with consensus expectations of roughly $3.24. Total revenue came in at $29.59 billion, ahead of estimates near $29.36 billion.
AI semiconductor sales were the standout within the quarter, rising 221% year-over-year to $16.7 billion and accounting for 56% of total revenue. CEO Hock Tan said that "demand for our custom AI accelerators and networking continues to be very strong." Management also presented an aggressive multi-year revenue roadmap, forecasting AI semiconductor revenue of $115 billion in fiscal 2027 and $230 billion in fiscal 2028.
"Demand for our custom AI accelerators and networking continues to be very strong."
At the same time, infrastructure software revenue of $8.75 billion fell fractionally short of consensus, adding a note of caution to the quarter's otherwise robust metrics.
The share retreat occurred in the context of a mildly positive broader market, which underlined the company-specific nature of the move - the S&P 500 was up 0.15%, the Dow Jones climbed 0.23%, and the Nasdaq advanced 0.23% during the same pre-market session. That divergence suggests the pressure on Broadcom was driven by its guidance rather than macroeconomic factors.
The reaction is consistent with recent investor behavior toward Broadcom. The stock had been trailing the broader semiconductor group year-to-date, and some analysts - including Morgan Stanley - cautioned that very high investor expectations around AI revenue increases the chance that the market would punish guidance that did not exceed the most bullish models. In some cases, market models had placed FY2027 AI revenue assumptions above $150 billion, amplifying the downside risk when management's guidance did not top those forecasts.
With the shares trading well below the company's 52-week high of $495, the guidance shortfall reawakened concerns about competitive intensity in the custom processor market. That dynamic left sellers in control in pre-market trading and set the tone heading into the regular session.
In sum, Broadcom's Q3 operational performance was strong on the headline numbers and driven by an outsized contribution from AI semiconductors, but the Q4 revenue outlook that fell short of consensus and the slight miss in infrastructure software revenue combined to pressure the stock ahead of the open.