Shares of Broadcom sank in morning trading, down 4.3% to $375.42 as the stock extended a several-session decline that began after the company reported fiscal second-quarter results that fell short of investor hopes for an upgraded guidance outlook.
Quarterly results and guidance
Broadcom posted fiscal Q2 revenue of $22.19 billion, a 48% increase from the year-ago period. The company said AI semiconductor revenue more than doubled to $10.8 billion. Despite the strong top-line performance and notable AI sales growth, CEO Hock Tan did not raise Broadcom's long-standing AI chip revenue target; management reiterated only that fiscal 2027 AI semiconductor revenue would exceed $100 billion.
The company set Q3 AI chip revenue guidance at $16 billion, below the approximately $17.2 billion that analysts had expected. In addition, enterprise software revenue missed Street estimates, creating a layered disappointment for a stock that had been priced with elevated expectations.
Analyst responses and margin outlook
In the days following the earnings announcement, Macquarie downgraded Broadcom (AVGO) from Outperform to Neutral, pointing to a growing risk that Google - identified in company commentary as Broadcom’s largest custom chip customer - is increasingly designing AI silicon internally, which could reduce Broadcom’s share of application-specific integrated circuits over time.
UBS kept a Buy rating on Broadcom but lowered its price target to $485. Separately, analysts highlighted that guided gross margins are expected to compress to roughly 74% in the third quarter, down from 77.1% in Q2. Management attributed the anticipated margin decline to a richer mix of lower-margin custom AI products.
New strategic move
Broadcom said it had formed a $35 billion AI XPV Platform in partnership with Apollo Global Management and Blackstone. The platform is intended to deploy more than 20 gigawatts of AI compute capacity through 2028. While the deal signals a sizable strategic initiative in AI infrastructure, it did not meaningfully counteract the prevailing negative investor sentiment following the earnings report.
Market context and peer performance
The broader market environment was unfavorable for high-multiple technology stocks on the day. The May Consumer Price Index showed U.S. inflation accelerating to 4.2% year-over-year - the highest rate since April 2023 - driven primarily by an energy shock linked to the ongoing U.S.-Iran conflict. That inflation reading reinforced expectations that the Federal Reserve will remain in a restrictive policy stance heading into its June 16-17 meeting, and markets were pricing in a meaningful probability of a rate hike by year-end.
Major indexes were lower: the S&P 500 was down 0.1%, the Dow Jones Industrial Average fell 0.5%, and the NASDAQ edged down 0.1%. Semiconductor peers, including Nvidia and Micron Technology, declined alongside Broadcom.
Combined pressures and outlook
Investors faced several compounding negative factors: an earnings report whose guidance disappointed, a potential competitive threat from customer insourcing, an analyst downgrade, and a macro backdrop defined by elevated inflation and hawkish Fed expectations. Together, these elements created the current headwinds for Broadcom's stock.
At the time of the report, Broadcom was trading 24.3% below its 52-week high of $495. With the next earnings report not expected until early September, near-term sentiment is likely to remain pressured until clearer signals emerge regarding a potential re-acceleration in AI chip demand or any revision of the company's long-term revenue targets.
Key data points
- Q2 revenue: $22.19 billion, up 48% year-over-year
- AI semiconductor revenue: $10.8 billion (more than doubled)
- Q3 AI chip revenue guidance: $16 billion (below ~ $17.2 billion analyst expectation)
- Guided gross margin: ~74% in Q3 versus 77.1% in Q2
- New AI XPV Platform: $35 billion, in partnership with Apollo Global Management and Blackstone, to deploy >20 gigawatts of AI compute capacity through 2028
- Share price movement: down 4.3% to $375.42; 24.3% below 52-week high of $495
- May CPI: 4.2% year-over-year; Fed meeting scheduled for June 16-17
Implications for sectors
The near-term impact is most pronounced in semiconductors and related high-growth technology names, with downstream effects for enterprise software vendors and data center infrastructure providers if demand signals soften. Financial markets more broadly are interpreting elevated inflation and the Fed outlook as risks for high-valuation technology shares.