Broadcom stock plunges 11% on weak software sales, unchanged AI chip forecast for the year

Broadcom reported weaker-than-expected revenue in its fiscal second-quarter earnings report.

The stock slid in extended trading and fell further after CEO Hock Tan did not raise the company’s full-year target of $100 billion in AI chip sales.

Here’s how the chipmaker did versus LSEG consensus estimates:

• Earnings per share: $2.44, adjusted, versus $2.40 estimated
• Revenue: $22.19 billion versus $22.27 billion estimated

Revenue climbed 48% from $15 billion in the same quarter a year earlier, Broadcom said in a statement. Sales have climbed in recent quarters, driven by demand for custom AI chips, including Google’s tensor processing unit.

The company said revenue this quarter will be about $29.4 billion, versus $28.53 billion expected by Wall Street analysts.

Broadcom shares are up close to 40% this year as of Wednesday’s close, topping the Nasdaq’s 16% gain. The stock has multiplied almost ninefold since the end of 2022, when ChatGPT kicked off the generative AI boom.

Net income increased to $9.31 billion, or $1.91 per share, up 88% from $4.97 billion, or $1.03 per share in the same quarter a year earlier. Adjusted earnings exclude stock-based compensation and tax adjustments. 

Broadcom helps other technology companies build custom chip designs, offering intellectual property and other essential technologies that AI chips require. It has attracted increased attention from investors as cloud giants design their own custom chips. In December, Tan said that Anthropic had placed an order for $10 billion in AI chips. 

Tan said on an earnings call with analysts that Broadcom has six core custom chip customers, including Anthropic, Google, Meta and OpenAI, which are driving the company’s growth in AI revenue. But Tan did not raise the company’s forecast for $100 billion in AI semiconductor sales in 2026.

“We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion,” Tan said.

AI revenue more than doubled in the second quarter on an annual basis to $10.8 billion, which Tan attributed in a statement to the company’s custom AI chips as well as other parts needed to network them together. He said the company expected AI revenue to triple in the current quarter to $16 billion. 

Broadcom reported $15.1 billion in revenue from semiconductor solutions, the company’s chip sales division, which also includes networking parts and Wi-Fi chips in addition to AI accelerators and networking. That revenue topped a StreetAccount estimate of $14.72 billion.

It also sells enterprise software, much of which it acquired through its purchase of VMWare in 2023. Broadcom reported $7.18 billion in infrastructure software revenue, which was up 9% on an annual basis, but which was short of the $7.32 billion in sales expected by analysts polled by StreetAccount.

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