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Broadcom (NASDAQ:AVGO) came under pressure in after-hours trading after reporting second-quarter results that fell slightly short of Wall Street expectations and maintaining its long-term artificial intelligence revenue targets rather than raising them.
The semiconductor group reported second-quarter revenue of $22.19 billion, marginally below analysts’ consensus forecast of $22.27 billion. The results arrive as Broadcom continues to compete for a larger share of the rapidly expanding AI infrastructure market, where Nvidia remains the dominant supplier of graphics processing units used for artificial intelligence workloads.
Investor sentiment was further affected by the company’s outlook for AI-related revenue. Broadcom forecast AI chip sales of approximately $16 billion for the third quarter, slightly below the $16.36 billion expected by analysts surveyed by Visible Alpha.
Following the announcement, Broadcom shares fell more than 13% in extended trading as investors reacted to what many viewed as a lack of upward revisions to the company’s longer-term growth projections.
Chief Executive Hock Tan said Broadcom now expects to deliver more than 10 gigawatts of AI computing capacity by 2027, representing a modest increase from previous expectations. However, the company left unchanged its forecast for $100 billion in AI-related chip revenue by that year.
“Nothing slows down what was estimated prior – they just didn’t raise it,” said Ben Bajarin, chief executive of technology consultancy Creative Strategies.
The market reaction highlights the exceptionally high expectations surrounding AI-related semiconductor companies, many of which have enjoyed substantial share price gains over the past two years.
Competition in the custom AI chip market is also intensifying. Companies such as Marvell Technology (NASDAQ:MRVL) are increasingly targeting hyperscale cloud providers with bespoke semiconductor solutions. Earlier this year, Marvell projected that its custom chip business would generate more than $10 billion in annual revenue by 2029 and also issued revenue guidance ahead of market expectations.
The growing importance of AI inference — the process through which models generate responses to user requests — has accelerated demand for customised processors tailored to specific workloads. This trend is encouraging major cloud providers to design their own chips in an effort to improve performance and reduce costs, creating significant opportunities for semiconductor suppliers.
Broadcom’s ability to meet future demand has occasionally raised concerns due to constraints across the semiconductor supply chain. However, management sought to reassure investors during the earnings call, stating that the company is “very comfortable” with its supply position for both 2026 and 2027.
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“Today’s miss on revenue and subsequent post-market pull back (in shares) shows the market demands perfection for this chip rally to keep running,” said Ryan Lee, senior vice president of product and strategy at Direxion.
Despite the market’s negative reaction, Broadcom issued strong overall guidance for the current quarter. The company expects third-quarter revenue of approximately $29.4 billion, comfortably ahead of the analyst consensus forecast of $28.54 billion compiled by LSEG.
AI Business Continues to Drive Growth
Although investors focused on the revenue miss and unchanged long-term targets, Broadcom’s underlying AI business remains a major source of growth.
The company continues to benefit from strong demand among hyperscale customers, including Meta and Alphabet’s Google, which use Broadcom’s custom silicon solutions to support increasingly complex AI workloads.
Industry forecasts suggest that major technology companies could spend more than $700 billion on artificial intelligence infrastructure this year, compared with roughly $400 billion in 2025, highlighting the scale of investment currently flowing into the sector.
As AI applications become more sophisticated, cloud providers are increasingly seeking customised processors that can be optimised for specific machine-learning tasks. Broadcom has positioned itself as a leading supplier in this segment.
Management reiterated plans to ship approximately 10 gigawatts of AI computing capacity next year, with significantly higher volumes expected beyond that point.
“Q2 semiconductor revenue from AI of $10.8 billion grew 143% year-over-year, above our forecast, driven by increasing demand for custom AI accelerators and AI networking,” Tan said in a statement.
More About Broadcom Inc.
Broadcom Inc. is a global semiconductor and infrastructure software company serving data centres, cloud providers, telecommunications operators and enterprise customers. The company is a leading supplier of custom AI accelerators, networking solutions and connectivity technologies, with growing exposure to the artificial intelligence market through partnerships with major hyperscale cloud providers.
As demand for AI infrastructure continues to accelerate, Broadcom has emerged as one of the industry’s key beneficiaries, leveraging its expertise in custom silicon design and advanced networking technologies to support next-generation computing workloads.
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