Broadcom Stock Dives on Lower AI Sales Outlook

Broadcom's stock experienced a significant 15% drop in premarket trading on Thursday. This decline followed the custom chip designer's artificial intelligence sales outlook for the current quarter falling below analyst estimates.

The company reported second-quarter revenue of $22.19 billion, slightly surpassing expectations, and earnings per share of $2.44, also exceeding forecasts. For the current quarter, Broadcom anticipates revenue of $29.4 billion, higher than the consensus estimate.

Despite a 143% year-over-year increase in second-quarter AI semiconductor revenue, the projected third-quarter AI chip sales of $16 billion did not meet the analysts' consensus of $17.2 billion. Furthermore, the company did not revise its 2026 AI semiconductor sales forecast upwards.

CEO Hock Tan stated, "We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion." This reiteration aims to reassure investors about the long-term AI semiconductor market.

The company's shares had previously seen substantial gains, reaching multiple all-time highs as investors anticipated strong results. The high expectations set the bar, contributing to the sharp reaction to the latest forecast.

Semiconductor stocks, including Broadcom, have been leading the market rally this year, fueled by the booming AI data center sector. Broadcom is positioned to benefit from an estimated $650 billion in hyperscaler artificial intelligence spending this year, with clients like Google and Meta.