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Broadcom's Whiplash: Shares Tank After Pre-Earnings SurgeReported by Leo Miller. Date Posted: 6/5/2026. 
Key Points
- Broadcom shares picked up a huge amount of steam going into its earnings report, but that steam let off after earnings.
- Despite beats across the board on headline metrics, Broadcom's AI outlook was less spectacular than expected.
- Nonetheless, Broadcom's business is chugging, with the firm guiding for its highest growth in nearly a decade next quarter.
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Shares of semiconductor giant Broadcom (NASDAQ: AVGO) have been red hot in Q2. As of the June 3 close, Broadcom shares were up 55% for the quarter. At that point, Broadcom was on track to deliver its second-best quarterly performance ever, trailing only a 65% gain in Q2 2025.
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However, after the company’s latest earnings report, it now appears unlikely that Broadcom will break that record. Shares dropped by approximately 13% in the trading day following Broadcom’s report, falling below $420. While Broadcom beat estimates across key top-line figures, there were still some notable cracks in the report that were difficult to overlook, given the company’s extremely high expectations. Broadcom Beats, AI Guidance Falls ShortIn its fiscal Q2 2026 report, Broadcom posted revenue of $22.19 billion, an increase of 48% year-over-year (YOY). This slightly exceeded estimates of about $22.13 billion. On adjusted earnings per share (EPS), the company posted $2.44, an increase of 54% YOY, and also slightly topped estimates of $2.40. Broadcom's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin came in at 69%. That exceeded the company’s guidance of 68% and analyst expectations of 68.6%. Broadcom’s artificial intelligence (AI) semiconductor revenue rose a massive 143% YOY to $10.8 billion, and the firm expects growth to accelerate next quarter. In Q3, Broadcom projects AI semiconductor sales of $16 billion, or an increase of 200% YOY. Despite that monstrous growth outlook, Broadcom’s AI semiconductor guidance was viewed as one of the biggest negatives in the report. Wall Street analysts had expected the figure to come in near $17.2 billion. Nonetheless, Broadcom’s overall Q3 guidance came in above expectations. The company projects revenue will grow by 84% YOY to $29.4 billion, well above the expected $28.25 billion. Overall, these numbers were solid—but solid wasn’t what Broadcom needed. In the seven trading days leading up to its report, Broadcom surged more than 15%, adding around $300 billion to its market capitalization. That raised the bar considerably; Broadcom needed to wow investors to keep the rally going. With only modest beats and a miss on AI semiconductor guidance, the company did not clear that elevated hurdle. Tan Stays Consistent, Holds Back on 2027 Outlook BoostAnother source of disappointment was Broadcom’s refusal to raise its AI semiconductor guidance for 2027. It continued to project more than $100 billion. Investors likely hoped to see that figure move higher. Competitor Marvell Technology’s (NASDAQ: MRVL) recent guidance increase was probably a factor behind that expectation, along with the run-up in AVGO shares. Even so, it is important to understand that Broadcom’s management team moves at its own pace—not the pace markets or analysts would prefer. Broadcom tends to guide conservatively until it has a major announcement to make. CEO Hock Tan has repeatedly pushed back on analyst attempts to get greater visibility into Broadcom’s revenue outlook. In some cases, Tan has pushed back on those attempts forcefully. During the Q2 call, Tan told JPMorgan analyst Harlan Sur, “We're not trying to guide you every quarter on what 2027 would be like." In other words, expecting Broadcom to raise 2027 guidance, especially with two quarters still remaining in 2026, is somewhat unrealistic. When shares surge ahead of a report, that stance can clash with the psychology of investors who want blockbuster numbers right away. Additionally, many of Broadcom’s customer relationships are long-term in nature. Broadcom designs multiple generations of customized AI chips for its partners, which operate on their own timelines. As a result, revenue may not scale cleanly from quarter to quarter, creating the potential for AI semiconductor guidance misses like the one seen in Q3. Tan’s Statements Add Weight to Alphabet Diversification ConcernsStill, statements made about Broadcom’s relationship with Alphabet (NASDAQ: GOOGL) were a bit concerning. The companies have extended their long-term partnership for Broadcom to help develop Alphabet’s tensor processing units (TPUs). However, that does not mean Alphabet can’t collaborate with other companies on TPUs as well. For example, MediaTek (OTCMKTS: MDTKF) is also doing work on TPUs. Hock Tan noted that while the agreement with Alphabet is “very, very strong… we fully expect that there will be some diversity of sources for them." In other words, Tan more or less confirmed that Alphabet is not relying on Broadcom as its only TPU partner. Broadcom Eyes Historically Strong Growth as Shares Take a HitOverall, Broadcom did not deliver the quarter investors were betting on as they bid up shares. Still, the company expects revenue to grow by 84% YOY next quarter—the firm’s second-highest quarterly growth rate since 2017. Broadcom expects AI semiconductor growth of 200% to drive that result. Despite Broadcom not living up to sky-high expectations, it's hard to argue that its business isn't firing on all cylinders in 2026. |
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