- Lead. Broadcom shares fell roughly 15% on June 4 despite posting record Q2 revenue of $22.19 billion and AI chip revenue of $10.8 billion — up 143% year-over-year — because CEO Hock Tan declined to raise the company’s full-year AI revenue target.
- Fact. Tan held the full-year AI semiconductor revenue guidance at “in excess of $100 billion,” unchanged from prior guidance, even as Q2 AI revenue more than doubled on an annual basis.
- Stake. The sell-off dragged other chip stocks lower, illustrating how much of the sector’s valuation now depends not on delivering strong results, but on the cadence of upward guidance revisions.
Broadcom reported second-quarter fiscal 2026 earnings per share of $2.44 on an adjusted basis, slightly ahead of the $2.40 consensus estimate, with total revenue of $22.19 billion — up 48% from the $15 billion recorded in the same quarter a year earlier but fractionally below the $22.27 billion Wall Street had expected, according to CNBC’s earnings coverage. Broadcom guided for Q3 revenue of approximately $29.4 billion, ahead of the $28.53 billion analyst consensus.
AI revenue doubles, but the forecast stays flat
The headline AI number was striking: AI semiconductor revenue reached $10.8 billion in the quarter, a 143% increase year-over-year, growing nearly three times as fast as total company revenue. That pace of expansion had led a portion of the investor base to anticipate that Tan would raise the full-year AI chip target beyond $100 billion. He did not. The guidance reiteration was enough to send shares down roughly 15% in after-hours trading on June 3 and into the June 4 session.
The dynamic illustrates a structural feature of how AI-adjacent chip companies are now priced. Investors have built forward expectations into valuations that require not merely continued growth but accelerating growth accompanied by rising guidance. When a company delivers 143% AI revenue growth and still fails to lift the bar, the gap between expectation and delivery registers as disappointment regardless of the underlying business momentum.
A speed bump for chip stocks broadly
Broadcom’s decline was not isolated. Cybersecurity firm CrowdStrike also fell sharply after its own earnings report, adding a second pressure point to technology sector sentiment on June 4. The broader market paused a rally that had carried the Nasdaq Composite up 8.43% in May. The reversal was narrow — driven by chip and high-multiple technology stocks rather than economy-wide selling — but it was enough to end what analysts had characterised as an unusually extended winning streak for equities.
The episode echoes patterns seen in previous AI investment cycles: the gap between what companies deliver and what hyper-optimised pricing requires can be vanishingly small. The AI chip sector’s 2025 IPO boom was premised on a world of sustained demand acceleration. Broadcom’s hold on its guidance does not disprove that premise, but it demonstrates that the market’s patience for anything short of a raised ceiling has shortened considerably. Tan’s Q3 revenue guide of $29.4 billion, if met, would represent another record quarter — a fact the market chose to discount.