Broadcom shares drop 13% in pre-market as AI revenue forecast remains unchanged

Shares of semiconductor giant Broadcom plummeted nearly 13% in pre-market trading on Thursday, following the company's release of second-quarter financial results that fell short of market expectations. Despite the stock's decline, the company maintained its annual revenue forecast for artificial intelligence (AI) chips, projecting it to exceed $100 billion for fiscal year 2026.

Broadcom reported revenues of $22.19 billion for its fiscal second quarter, slightly missing the $22.27 billion anticipated by analysts. However, adjusted earnings per share came in at $2.44, surpassing the consensus estimate of $2.40. Overall revenue saw a significant 48% increase year-over-year, largely driven by robust demand for AI chips, which have become a primary growth engine for the company.

Investors reacted negatively to CEO Hock Tan's reiteration of the $100 billion AI semiconductor revenue forecast without an upward revision. The semiconductor division generated $15.1 billion in revenue, exceeding expectations, while the infrastructure software business, bolstered by the VMware acquisition, brought in $7.18 billion, slightly below the $7.32 billion expected. AI-related revenues more than doubled in the quarter to $10.8 billion, with projections for $16 billion in the current quarter.

Broadcom identified major AI chip clients including Google, Meta, OpenAI, and Anthropic. The company's performance highlights the intense investor focus on the AI sector, where even slight deviations from expectations can lead to significant market reactions.