Broadcom's Stock Plummets Despite AI Revenue Growth and Promising Forecasts

Recent activities surrounding Broadcom have attracted attention due to a significant shift in company performance and expectations. On June 6, Broadcom's stock experienced a notable decline of 5%, marking two consecutive days of downward movement, cumulatively dropping 5.42% over the period.

Broadcom reported a 46% growth in AI revenue for its second fiscal quarter, a deceleration compared to the previous quarter's 77% growth rate. This slowdown contributed to a tempered outlook for future growth from investors. Additionally, Broadcom forecasts its third-quarter revenue to be approximately $158 billion, signaling a 21% year-on-year increase; this is slower than the 25% growth observed in the preceding quarter.

Despite announcing favorable financial results for the second quarter, which include a 20% year-on-year sales increase to $150 billion, exceeding analysts’ expectations, the market responded unfavorably. Adjusted net profit reached $77.9 billion, representing a healthy 44% growth, and adjusted earnings per share of $1.58 outperformed projections of $1.56. Nevertheless, stock prices continued to fall, highlighting investor concerns.

Expectations for the upcoming third quarter indicate continued growth with anticipated revenue of $158 billion. Notably, the company’s outlook for AI-related revenue, projected at $51 billion, is mildly optimistic compared to general consensus, but falls short of some analysts’ more ambitious forecasts.

Furthermore, Broadcom’s infrastructure software division recorded a 25% increase, yielding $65.96 billion in revenue. The firm’s semiconductor solutions, providing products for data centers and networks, secured $84.08 billion, marking a 17% increase and surpassing expectations.

Looking ahead, Broadcom envisions AI semiconductor revenue will accelerate, driven by substantial investment from hyperscale partners, promising momentum across ten consecutive quarters. Despite promising figures, sentiment remains cautious due to potential challenges in achieving previously expected high growth rates, particularly in AI-driven segments.