Shares of Broadcom Inc (NASDAQ:AVGO, XETRA:1YD) fell more than 14% on Thursday after the chipmaker's fiscal third-quarter AI revenue guidance and its reiteration of a full-year 2027 target fell short of investor expectations, overshadowing strong second-quarter results.
Broadcom guided for AI revenue of $16 billion in the third quarter, below analyst estimates of around $17.3 billion, and reiterated its fiscal 2027 AI revenue target of more than $100 billion, a figure analysts said the market had already priced in at a considerably higher level.
The company reported second-quarter revenue of $22.2 billion, slightly ahead of guidance, with AI revenue of $10.8 billion surpassing its own forecast by $100 million. Earnings per share came in at $2.44, ahead of Wall Street estimates.
The stock's decline reflected investor frustration that Broadcom did not raise guidance despite strong order momentum, with analysts pointing to supply constraints rather than demand weakness as the limiting factor.
Bank of America framed the guidance reiteration as conservatism. The bank said absolute AI growth remains on track for approximately 180% year-over-year in fiscal 2026 and nearly 100% in fiscal 2027, and sees earnings per share power exceeding $30 by 2030.
"We view this as a sign of conservatism given ongoing supply constraints at customers," Bank of America analysts wrote, pointing to an expanding roster of custom chip clients, including Anthropic, Meta and OpenAI as growth catalysts in the coming quarters.
UBS maintained a similar stance, leaving its fiscal 2027 AI revenue estimate roughly unchanged at approximately $135 billion and raising its calendar 2027 total revenue estimate to around $213 billion on stronger software performance, though modest gross margin pressure trimmed its earnings-per-share estimate.
Not all analysts were as sanguine. Jefferies described the quarter as a mixed print, with July guidance falling short of expectations for a meaningful beat and management's fiscal 2027 AI commentary limited to a reiteration of the $100 billion-plus figure. The firm flagged gross margin pressure as an ongoing concern as Broadcom's custom ASIC business continues to scale.
Baird retained its Outperform rating but highlighted a more specific concern: Broadcom's largest custom silicon customer shifting inferencing workloads to Taiwan-based MediaTek. Baird analysts said they believe MediaTek has secured sufficient front-end manufacturing capacity to support two to three million units of v7 inferencing chips in 2027, a shift they said would result in some multiple contraction for Broadcom's stock even as the company's longer-term AI revenue trajectory remains strong.
A separate development shaved near-term AI revenue estimates. Anthropic, which had previously been expected to purchase full rack systems from Broadcom, is now procuring chips only, a change Baird estimates reduced fiscal second-half 2026 and first-half 2027 revenue by roughly $7 billion to $8 billion per period.
Broadcom disclosed expanded agreements across its six core AI customers. Anthropic is expected to access more than 1 gigawatt of Broadcom TPU-based compute in 2026 and has agreed to approximately 5 gigawatts of next-generation TPU compute beginning in 2027. OpenAI has silicon in production on track for late 2026, with a contractual commitment to deploy 1.3 gigawatts in 2027. Meta is expected to receive 1 gigawatt by the second half of 2027 as part of a 3-gigawatt ramp through 2028.
Broadcom also announced a special-purpose vehicle with Apollo Global Management and Blackstone targeting more than 20 gigawatts of AI compute capacity through 2028, with an initial tranche valued at $35 billion.
With multi-gigawatt commitments from some of the world's largest AI developers, expanding software revenue, and order visibility stretching into 2028, the company's growth story remains largely intact. But with its stock trading at a premium that assumes continued upside surprises, even a quarter that would have impressed in any other era can send shares sharply lower. The central question for investors is no longer whether Broadcom will benefit from the AI buildout, but whether the market has already priced in more than the company can deliver.