European semiconductor stocks declined on Thursday following Broadcom's decision to reiterate, rather than raise, its fiscal 2027 artificial intelligence revenue target of $100 billion. The U.S. chipmaker’s stock fell more than 13% in premarket trading after the company published its fiscal second-quarter results and issued guidance that left some analysts and investors underwhelmed.
By 09:23 GMT, Nokia shares had tumbled more than 9%. Other European chip and equipment names including STMicroelectronics, Infineon, ASML and ASM registered drops in the 2% to 6% range as markets digested Broadcom’s commentary on near-term AI revenue expectations and margin outlook.
Broadcom reported fiscal second-quarter revenue of $22.2 billion and earnings per share of $2.44, modestly ahead of Wall Street estimates of $22.1 billion and $2.39. The company said AI semiconductor revenue rose 143% year-over-year to $10.8 billion, a result that topped market expectations.
Despite that strong AI performance, Broadcom left its fiscal 2027 AI revenue target at $100 billion, a decision that disappointed investors who had expected management to raise the long-range goal in light of the strength in its custom chip programs. For the current quarter, the company guided revenue of roughly $29.4 billion, above consensus estimates of $28.6 billion. However, Broadcom’s guidance for AI chip revenue of $16 billion fell short of the street’s $17.2 billion forecast.
Management also signaled that gross margins are expected to decline by around 300 basis points to roughly 74%, a change the company attributed to a richer mix of custom accelerator chips in its revenue mix.
Analysts reacted with a mix of caution and measured optimism. Bernstein analyst Stacy Rasgon, who raised his price target to $550 from $525, noted that the guidance shortfall on AI was "not entirely surprising." He wrote: "AI revenues can of course be lumpy. But coupled with the company’s decision to reiterate, rather than raise, their FY27 $100B AI guidance the stock took a hit in the aftermarket. We suspect the shares may take a pause for the next couple of quarters. But the story gets interesting again once we enter 2027." Rasgon added: "At the end of the day we have a company growing revenues and EPS >50%, with gross/operating margins in the 70s/60s, and potentially trading at a teens P/FE in an environment that is only getting stronger."
BofA Securities analyst Vivek Arya took a more constructive view on the company’s AI pipeline, raising his price target to $530 from $450. He noted that Broadcom’s visibility extends into 2028 with multiple new customers including Anthropic, Meta and OpenAI and described management’s decision not to raise the $100 billion guidance as "a sign of conservatism given ongoing supply constraints at customers."
Market participants responded to the combination of strong reported AI revenue growth and the conservative forward guidance by trimming exposure to semiconductor-related stocks in Europe, reflecting sensitivity to both near-term guidance and longer-term pacing of AI revenue realization.