Broadcom shares tumble despite record earnings and 200% AI revenue forecast
Shares fell 12.6% on June 3 and a further 8% the following day as Wall Street reacted to the company’s decision to reaffirm rather than raise its long-term outlook.
Broadcom (AVGO) shares declined by 12.6% on June 3 following its fiscal second-quarter earnings report, with losses extending to 8% the next day. The company reported record net revenue of $22.19 billion, a 48% increase year-on-year, and non-GAAP earnings of $2.44 per share. AI semiconductor revenue reached $10.8 billion, up 143% year-on-year. Management forecast AI chip revenue to grow by more than 200% in the third quarter of fiscal 2026. The market reaction was negative, attributed to impossibly high expectations and the decision to reaffirm rather than raise the longer-term outlook.
The stock had climbed to an all-time high of $495 on June 3 before the earnings release, but has since declined 24.7% from that peak. Despite the sharp pullback, Broadcom’s market capitalisation remains roughly $1.83 trillion, and the stock has gained 60.42% over the past year, outperforming the broader S&P 500 Index. The company also reported record adjusted EBITDA of $15.24 billion and free cash flow that increased 60% year-on-year to $10.26 billion.
Investor disappointment appears linked to the company’s decision to reaffirm its long-term outlook rather than raise it, a signal of how elevated expectations have become for AI chipmakers. Additionally, some market participants focused on the Infrastructure Software segment, which generated $7.18 billion in revenue, a 9% year-on-year increase. This growth was viewed as modest compared to the 79% year-on-year growth in the Semiconductor Solutions segment.
Wall Street consensus remains a "Strong Buy," with 34 of 42 analysts recommending a "Strong Buy," three a "Moderate Buy," and five a "Hold." The average analyst price target is $507.13, implying 28.32% upside, while the high target is $640, suggesting nearly 61.9% potential gain. The company’s strong cash generation and dominant position in custom AI silicon continue to underpin analyst confidence despite the recent volatility.
The fiscal third-quarter 2026 forecast of approximately $29.4 billion in revenue, representing an 84% year-on-year increase, further underscores the scale of Broadcom’s expansion. The projection for AI semiconductor revenue of $16 billion implies a growth rate of more than 200% compared to the same period in the prior fiscal year. This data highlights the rapid deployment of custom silicon by hyperscale cloud providers, even as short-term market sentiment remains sensitive to guidance nuances.
