Broadcom let down by software revenue and AI chip outlook. Shares tumble after record high
The chipmaker's revenue grew less than analysts had expected
Broadcom's AI chip sales forecast for the quarter and year were below Wall Street's expectations / Photo: ViStock / Shutterstock.com
Broadcom, which makes custom AI processors for cloud giants, gave a weak outlook for chip sales. The company's software business also posted modest results, and as a result, total revenue for last quarter disappointed Wall Street. Broadcom shares collapsed by 13% in the postmarket after the report was released.
Details
Investors are closely following Broadcom's revenue from the sale of processors for AI servers. It more than doubled (+143%) year-on-year to $10.8 billion in the second quarter of fiscal 2026, which ended Ma. 3.
Broadcom CEO Hock Tan attributed this growth to custom AI chips and the network components needed to combine them into computing systems, according to the company's press release. According to him, in the current quarter, revenue from the AI segment could triple and reach $16 billion. However, Wall Street was counting on more - $17.2 billion, notes Bloomberg.
Tan also said Broadcom will sell $56 billion worth of AI chips by the end of the current fiscal year. Analysts expected it to be $57.6 billion, Bloomberg writes.
After the publication of the report Broadcom securities collapsed in extended trading on Wednesday, June 3, by about 13%. The shares ended the main trades with a 0.5% decrease amid the general market decline.
What else the company announced
The semiconductor solutions division, which includes AI chips, networking equipment and Wi-Fi chips, generated $15 billion in revenue for the company. Analysts, according to StreetAccount, expected $14.72 billion. Broadcom's revenue growth in recent quarters was driven by demand for custom AI chips, including Google's Tensor Processing Units (TPUs), CNBC reported.
In addition to manufacturing AI chips, Broadcom remains an enterprise software developer after its acquisition by VMware in 2023. Revenue in the infrastructure software segment in the second quarter grew year-on-year by 9% to $7.18 billion. However, the result was below the expectations of analysts surveyed by StreetAccount, who predicted $7.32 billion, writes CNBC.
This had an impact on total revenue. It grew by 48% to $22.19 billion. However, analysts surveyed by LSEG, expected $22.27 billion, notes CNBC. Adjusted earnings per share amounted to $2.44 against the expected $2.4. Broadcom's net income for the quarter increased 88% to $9.31 billion, or $1.91.
Broadcom expects total revenue for the current quarter to be around $29.4 billion, while the Wall Street consensus forecast was for $28.53 billion.
Context
Broadcom is helping other tech companies develop custom AI chips by providing intellectual property and other key technologies needed to build AI processors. The company has attracted increased investor attention as cloud giants such as Amazon, Meta and Microsoft build their own specialized chips. In December, CEO Hock Tan announced that startup Anthropic had ordered $10 billion worth of AI chips.
Although the company is making progress in refocusing its business on artificial intelligence customers, it has to deal with overly high investor expectations, Bloomberg notes. In the five trading sessions before the report, Broadcom's market capitalization rose by about $270 billion amid optimism around AI.
This article was AI-translated and verified by a human editor
