Broadcom Inc. (NASDAQ:AVGO) shares cratered roughly 15% in Thursday premarket trading to around $408, even after the custom-silicon leader delivered record quarterly results, a brutal verdict that says far more about expectations than performance.
Broadcom reported fiscal second-quarter revenue of $22.2 billion, edging past the Street’s $22.1 billion, with adjusted EPS of $2.44 versus the $2.39 consensus. AI semiconductor revenue surged 143% year-over-year to $10.8 billion.
By almost any standard, it was a blowout. The problem was the guidance.
Broadcom steered third-quarter AI semiconductor revenue to $16.0 billion — below the $16.4 billion Street estimate — and CEO Hock Tan declined to raise the full-year AI target, reiterating fiscal 2027 AI revenue “in excess of $100 billion.”
Against the elevated expectations baked into a stock at record highs, an in-line revenue guidance was not enough.
Goldman Says Buy The Broadcom Pullback
Goldman Sachs is treating the selloff as an opportunity.
Analyst James Schneider reiterated a Buy rating and lifted his 12-month price target from $500 to $525, applying an unchanged 30x multiple to a raised normalized EPS estimate of $17.50. From Thursday’s premarket print near $408, that target implies nearly 30% upside.
Broadcom also remains in the firm’s “Conviction List” of stocks to buy.
“We would be aggressive buyers of the stock following a pullback as Broadcom reiterated its very strong growth outlook for 2027 and beyond,” Schneider said in a post-earnings note.
According to the analyst, this bold call is based on three pillars: fiscal-year 2027 AI semiconductor revenue significantly above $100 billion across up to 10 gigawatts of datacenter deployments; expanding custom-silicon engagements; and secured component supply through fiscal 2027.
Broadcom now counts six custom-chip customers — including Google, Meta, Anthropic and OpenAI — with two additional XPU clients carrying $6 billion in purchase orders already booked for shipments beginning late 2026.
Anthropic is expected to expand from an initial 1-gigawatt deployment to an additional 5 gigawatts beginning in fiscal 2027, while OpenAI is targeting 1.3 gigawatts of deployment next year. Meta’s custom XPU program is also expected to scale materially through 2028.
Goldman raised its AI semiconductor revenue estimates to $57 billion, $133 billion and $193 billion across fiscal years 2026, 2027 and 2028.
“We believe Broadcom’s leadership in AI networking and custom silicon enables the lowest inference cost for key hyperscaler customers,” Schneider added.
AI Networking Still A Key Advantage
Goldman also pointed to Broadcom’s dominant position in AI networking.
The company continues to see strong demand for its Ethernet networking products, including its Tomahawk switch family and high-speed connectivity technologies used inside AI clusters. Networking represented roughly 40% of Broadcom’s AI semiconductor revenue during the quarter, underscoring that the company is benefiting from AI infrastructure spending beyond custom chips alone.
Another positive was supply.
Broadcom said it has secured all critical components needed to support its AI revenue forecasts through fiscal 2027, despite ongoing shortages across memory, packaging and optical components.
Image: Dennis Diatel/Shutterstock
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