Why Broadcom Stock Fell After a $200 Million Miss and a $115 Billion AI Forecast

Key Takeaways

• Broadcom's AI chip revenue reached $16.7 billion in the third quarter, up 221% year-over-year, beating both its own $16 billion forecast and the $16.36 billion analysts expected.
• The company’s stock fell because fourth-quarter revenue guidance of $34.8 billion came in about $200 million under the $35 billion Wall Street was carrying.
• Broadcom CEO Hock Tan raised Broadcom's fiscal 2027 AI revenue target to about $115 billion from the $100 billion he refused to move in June, and told analysts supply is now the limit rather than demand.

Broadcom shares fell as much as 6% in after-hours trading on Tuesday, September 2. The company had just beaten Wall Street on revenue, earnings and AI chip sales.

Broadcom builds the custom AI accelerators and networking chips that Google, OpenAI and Anthropic use to train and run their models. Revenue rose 86% year-over-year to $29.591 billion, against the $29.519 billion expected by analysts polled by LSEG, and adjusted earnings came in at $3.32 a share versus $3.25.

What sank the stock was one line in the outlook. Broadcom guided fourth-quarter revenue to $34.8 billion, roughly $200 million short of the $35 billion analysts were carrying, a gap of about half a percent on a quarter the company expects to grow 93%.

MORE INSIGHTS ON THIS TOPIC:

• Broadcom's AI Revenue Grew 143%, Yet the Stock Still Fell 14%
• How One Line From Qualcomm's CEO Turned a 7% Stock Crash Into a 16% Surge Overnight
• Amazon Stock Rises After $25B Anthropic Deal Locks In $100B AWS Spend

Why did Broadcom stock fall after earnings?

The stock closed the regular session on September 2 at $367.24, down 0.66%, before the results landed. It then fell as much as 6% after hours and recovered to about 3.5% down, at $354.43. CNBC put the drop at 5%. By pre-market on September 3, it was trading at $359.16, down 2.2%.

Morgan Stanley had flagged the risk the day before. In a September 1 note reported by TheStreet, the firm kept its Overweight rating and said: "the main risk into the print is expectations rather than fundamentals."

The firm models about $120 billion of fiscal 2027 AI revenue. It put some investor expectations as high as $150 billion.

Broadcom also went into the print about 20% below its June high, trading at roughly 61 times trailing earnings. MediaTek and Marvell Technology, which builds competing custom accelerators, have both pushed further into the same business.