Broadcom stock plunges 14% on weak software sales, unchanged AI chip forecast for the year
Broadcom reported fiscal Q2 results with EPS of $2.44 (adjusted) vs $2.40 expected and revenue of $22.19B vs $22.27B, according to the company and LSEG consensus. Shares fell about 14% in extended trading after CEO Hock Tan kept its 2026 AI chip sales target at $100B. AI revenue rose to $10.8B; company forecast Q3 revenue $29.4B.
Earnings beat/miss mix plus unchanged AI-chip sales target triggered a sharp de-rating despite reiterated >$100B AI guidance for FY2026 and AI revenue growth expectations.
Broadcom (AVGO) shares plunged after weak software sales and CEO Hock Tan left the full-year $100B AI chip sales target unchanged.
Near-term downside bias likely persists as the market focuses on software weakness and the lack of an AI-chip target raise.
Background
Broadcom’s growth narrative is increasingly tied to custom AI accelerators for cloud/model customers, while it also carries an enterprise/infrastructure software business from the VMware acquisition.
Why it matters
The key market shock is that software revenue missed expectations and management did not raise the headline $100B AI chip sales target, even as AI revenue growth accelerated and AI revenue guidance for the next quarter was strong.
Market relevance
A single-stock guidance decision (no raise) plus software weakness drove a large after-hours drawdown, making AVGO a focal point for AI-chip demand expectations.
Market effects
Highlights sensitivity of AI-semiconductor multiples to any perceived deceleration in total AI-chip demand and to non-AI segments like enterprise/infrastructure software.
US large-cap tech sentiment pressured in extended trading; could spill over to other AI infrastructure names via read-across on guidance conservatism.
Custom AI chip ecosystem (hyperscalers and model builders) remains strong, but guidance stickiness may temper global AI supply-chain enthusiasm.
Alternative perspectives
Despite the stock drop, AVGO reiterated AI semiconductor revenue guidance for FY2026 and guided AI revenue to triple in the current quarter, suggesting the market may be over-weighting software weakness.
The company also said it will offer “chips only” versus integrated systems, which could change customer mix/timing of revenue recognition even if unit demand remains intact.
Key entities
- companyBroadcom
Fiscal Q2 earnings showed weaker-than-expected revenue and enterprise/infrastructure software shortfall; AI chip sales forecast for FY2026 was left unchanged at $100B.
- executiveHock Tan
CEO reiterated >$100B AI semiconductor revenue guidance for FY2026/2027 momentum but did not raise the $100B AI chip sales target; also shifted positioning to “chips only”.
