Broadcom shares drop 4% despite strong earnings and revenue forecast

Broadcom shares dropped more than 4% on Thursday despite the chipmaker reporting stronger-than-expected earnings and revenue, as investors signaled the results were not impressive enough to justify the stock’s high expectations.

The company, a major player in AI chips and networking, posted fiscal third-quarter revenue of $29.6 billion—an 86% jump from last year—and earnings per share of $3.32, beating Wall Street estimates. AI semiconductor revenue alone surged 221% year over year to $16.7 billion. Yet, analysts said the "beat and raise" was not bold enough for a company so deeply tied to AI growth. Broadcom also forecast current-quarter revenue of $34.8 billion, slightly below the $35.05 billion analysts had anticipated.

Analysts noted the stock’s reaction reflects sky-high expectations for AI-driven performance. "The magnitude is not quite enough from a top and bottom line standpoint," said Cody Acree, a StoneX Financial analyst with a Buy rating on the stock. Broadcom’s role as a key supplier of custom AI chips and networking gear for data centers has fueled its growth, with CEO Hock Tan highlighting "very strong" demand in these areas. Still, the stock is up just 6% year-to-date, trailing rival Nvidia’s 20% gain.

The pullback underscores the pressure on AI-related stocks to consistently outperform. While Broadcom remains a critical player in the AI supply chain, investors are closely watching whether its growth can keep pace with the sector’s rapid expansion. The company’s guidance and execution in the coming quarters will likely determine whether the stock can regain momentum.