Broadcom shares slip as investors await higher AI chip guidance
Shares declined despite a 143% surge in AI revenue, with the market focused on unchanged fiscal 2027 forecasts and slower-than-expected software growth.
Broadcom shares fell following the release of its latest quarterly results, despite the company reporting a robust 48% year-on-year increase in revenue to $22.19 billion. Adjusted earnings per share also climbed 54% to $2.44, exceeding analyst expectations of $2.40. However, the stock price dropped as investors reacted with disappointment to the company’s decision not to raise its fiscal 2027 forecast for custom AI chip sales, which remains targeted at more than $100 billion.
The semiconductor revenue segment was the primary driver of growth, jumping 79% to $15.1 billion. This surge was largely attributable to AI semiconductor revenue, which skyrocketed 143% to $10.8 billion. The company’s closely watched semiconductor gross margin held steady at approximately 70%, with management noting that while the custom chip business operates at a lower margin, this is offset by the high margins generated by its networking business.
Despite the strong performance in semiconductors, overall results slightly missed analyst estimates of $22.27 billion, primarily due to slower growth in the infrastructure software segment. Software revenue rose 9% to $7.2 billion, falling short of the $7.3 billion consensus, although annual recurring revenue (ARR) for the segment climbed 17%. Non-AI semiconductor revenue also saw modest growth, rising 6% to $4.2 billion.
Looking ahead, Broadcom provided a strong outlook for the next quarter, forecasting fiscal Q3 revenue to climb 84% to $29.4 billion, ahead of the $28.5 billion consensus. This growth is expected to be driven by a projected 200% increase in AI semiconductor revenue to $16 billion, alongside a 31% year-on-year rise in infrastructure software revenue, supported by the recent release of VMware Cloud Foundation 9.1.
The company expects its momentum to continue into fiscal 2028, powered by six core customers including Alphabet, Meta Platforms, OpenAI, and Anthropic. Following the share decline, Broadcom trades at a forward price-to-earnings ratio of 22.5 times the fiscal 2027 consensus, reflecting market caution despite the company’s locked-in supply chain and strong growth trajectory.
