Stock falls over 3% in after-hours despite strong quarterly results and bullish AI commentary
Shares in Broadcom (NASDAQ: AVGO) dropped 3.47% in after-hours trading on Thursday, despite the chip and software giant beating Wall Street estimates for both earnings and revenue and raising guidance for the third quarter. The fall comes after a major rally that had seen the stock rise more than 75% from its April low.
For the second quarter ending May 5, Broadcom reported revenue of US$15bn, up 20% year-on-year and just ahead of consensus estimates. Adjusted earnings per share came in at US$1.58, beating expectations by two cents. Net income more than doubled to US$4.97bn, or US$1.03 per share, from US$2.12bn a year earlier.
CEO Hock Tan credited the performance to sustained strength in AI infrastructure demand and contributions from VMware, which was acquired in late 2023. “Our second quarter results were once again driven by strong execution and robust demand for our AI and software offerings,” he said.
Third-quarter outlook lifted on AI momentum
The company forecast third-quarter revenue of approximately US$15.8bn, exceeding analyst estimates of US$15.7bn. AI-related revenue is expected to rise to US$5.1bn in Q3, up from US$4.4bn in Q2, driven by custom AI accelerator deployments and Broadcom’s high-speed networking chips used in hyperscale data centres. Tan said growth in this segment would continue through fiscal 2026.
Semiconductor solutions generated US$8.4bn in Q2, a 17% year-on-year increase, while software revenue — boosted by VMware — grew 25% to US$6.6bn. Broadcom now derives roughly 30% of AI-related revenue from its switching business, which is benefiting from rising demand for AI chip clusters.
Investor reaction muted after strong run
Despite the solid numbers and upbeat forecast, investor enthusiasm appeared tempered after the stock’s recent surge. Some analysts suggested the post-earnings decline reflected profit-taking rather than fundamental concerns.
Broadcom instituted a 10-for-1 stock split last year and remains one of the top AI hardware plays, with analysts including Melius Research calling it a “must-own” stock in the current environment.
