Broadcom’s latest quarterly results and forward guidance both exceeded Wall Street expectations across the board, but market sentiment turned sharply lower. Investor enthusiasm for AI-related trades has clearly cooled, triggering a wave of selling in related stocks. Broadcom’s share price plunged more than 11% on Friday, marking its worst single-day performance since January this year.
So far this year, the stock’s cumulative gains had at one point reached around 75%–80%. Analysts at Mizuho Securities noted that the current pullback reflects profit-taking more than any deterioration in fundamentals, and is essentially a normal correction. Mizuho also raised its price target on Broadcom from $435 to $450.
From a fundamentals perspective, Broadcom’s performance remains strong. Quarterly revenue grew 28% year-on-year, with AI chip sales surging 74% year-on-year, driving total revenue to $18.02 billion, above the average analyst estimate of $17.49 billion. Adjusted earnings per share came in at $1.95, also beating market expectations of $1.86.
The company expects AI chip sales this quarter to double year-on-year to $8.2 billion, with growth driven by custom AI chips and AI networking-related semiconductor products.
However, some investors have expressed concern about near-term profitability. The Chief Financial Officer pointed out that because server rack systems require the purchase of more third-party components, gross margins on certain AI chip systems will face short-term pressure.
Even so, Broadcom disclosed that its AI-related order backlog over the next 18 months has reached $73 billion, including $21 billion in orders from Anthropic, which has been confirmed as one of Broadcom’s key customers.
Market Commentary:
The current market is being heavily influenced by AI-related anxiety. Broadcom’s AI business continues to outperform expectations, and its growth is still accelerating. It is difficult to see what more investors could realistically demand from its AI story. Despite short-term sentiment pressure, some institutions remain optimistic about the long-term growth trajectory of AI infrastructure.
