Is Broadcom a Buy After Its Latest Earnings Report?
Broadcom (AVGO) reported Q2 revenue up 48% to $22.19B and EPS of $2.44, above the $2.40 consensus. AI semiconductor revenue rose 143% to $10.8B; free cash flow was $10.26B. For Q3, it projected AI chip sales of $16B vs $17.2B expected and kept full-year AI chip sales guidance at $100B. Shares fell over 12% after hours.
Earnings beat on headline numbers, but AI chip sales guidance and unchanged full-year $100B target triggered an expectations reset and sharp selloff risk.
Broadcom reported Q2 results with strong revenue/EPS but guided Q3 AI chip sales to $16B vs $17.2B expectations, driving a >12% after-hours drop.
Near-term volatility likely elevated; downside pressure persists until investors see evidence of accelerating AI demand or a raised AI-chip outlook.
Background
Broadcom is a major AI infrastructure supplier focused on custom ASICs (not general-purpose GPUs), with AI semiconductor revenue tied to hyperscaler and AI workload demand.
Why it matters
The key trading issue is guidance optics: Q2 beat was offset by a Q3 AI chip sales guide below consensus and no increase to the $100B full-year AI chip sales target, prompting a sharp repricing of near-term AI growth expectations.
Market relevance
For traders, the actionable takeaway is the mismatch between strong reported results and the market’s required AI-chip sales trajectory, evidenced by the after-hours >12% decline.
Market effects
Signals that even leading AI infrastructure suppliers can face multiple compression if AI revenue growth expectations aren’t raised.
Primarily US large-cap semis sentiment; could spill over to AI-chip supply chain names via read-across on demand/dollars-per-GW.
AI compute buildout remains the theme, but guidance sensitivity suggests global investors will scrutinize throughput and pricing assumptions.
Alternative perspectives
Analyst commentary frames the quarter as an expectations reset rather than thesis damage, arguing AI compute demand is accelerating faster while $/GW stays stable.
The article highlights custom ASIC efficiency and Broadcom’s core custom-chip customer base; investors may be underweighting durability of AI revenue momentum into FY2027.
Key entities
- companyBroadcom
Subject of the earnings/guidance reaction; Q2 beat but Q3 AI chip sales guidance and unchanged full-year AI target drove the selloff.
- customer/partnerAlphabet
Long-term TPU partnership mentioned; Alphabet increased capex and is making TPUs available to other data center operators.
- customerMeta Platforms
Named as one of Broadcom’s core custom chip customers contributing to AI revenue momentum.
- customerOpenAI
Named as one of Broadcom’s core custom chip customers contributing to AI revenue momentum.
- customerAnthropic
Named as one of Broadcom’s core custom chip customers contributing to AI revenue momentum.
