Broadcom Stock Slumps Despite Beating Expectations
Broadcom's stock fell by as much as 6% in after-hours trading on September 2, despite beating Wall Street expectations for revenue and earnings. The company reported that its AI chip revenue reached $16.7 billion in the third quarter, up 221% year-over-year, surpassing both its own forecast of $16 billion and analyst estimates of $16.36 billion.
The decline in stock price was attributed to Broadcom's fourth-quarter revenue guidance of $34.8 billion, which fell short of analysts' expectations by about $200 million. However, the company's CEO Hock Tan increased the AI revenue target for fiscal 2027 to around $115 billion from its previous estimate of $100 billion.
Broadcom's custom AI accelerators and networking chips are used by companies such as Google, OpenAI, and Anthropic to train and run their models. The company reported a 86% year-over-year increase in revenue to $29.591 billion, beating analyst expectations of $29.519 billion.
Morgan Stanley had flagged the risk of disappointing earnings due to high expectations, with some investors anticipating up to $150 billion in AI revenue for fiscal 2027. Broadcom's stock was trading at around 61 times trailing earnings before the results were announced, about 20% below its June high.