SAN FRANCISCO: Chipmaker Broadcom missed Wall Street expectations for second-quarter (2Q) revenue and its top executive left a previous 2027 sales forecast unchanged, sending its shares down more than 13% in extended trading.
The 2Q revenue of US$22.19bil missed estimates of US$22.27bil, as Broadcom races with Nvidia whose dominant graphics processing units remain the industry standard for artificial intelligence (AI) workloads.
Broadcom also said it expects AI chip revenue of US$16bil in its current 3Q, slightly below estimates of US$16.36bil, according to analysts polled by Visible Alpha.
Chief executive officer Hock Tan said Broadcom now expects to ship more than 10GW worth of AI chips in 2027 – a slight increase from previous estimates – but stuck to the company’s long-range forecast of US$100bil in sales from those chips.
“Nothing slows down what was estimated prior – they just didn’t raise it,” Ben Bajarin, chief executive of technology consultancy Creative Strategies, said of the long-range forecast.
Rivals such as Marvell Technology are also making inroads with key hyperscale customers. At the end of May, Marvell said its custom chip business would surpass US$10bil in revenue in 2029, and forecast 2Q revenue above estimates.
Broadcom’s ability to meet AI demand has also been tested by a strained supply chain. But company executives on the post-earnings call assuaged such concerns, saying Broadcom is “very comfortable” that it has secured supply for 2026 and 2027.
“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.
Broadcom forecast 3Q revenue of about US$29.4bil, compared with analysts’ average estimate of US$28.54bil, according to data compiled by London Stock Exchange.
Still, Broadcom has been one of the biggest beneficiaries of the AI race.
Analysts view its core business as robust due to its lead position in the custom chip market with Meta and Alphabet’s Google as its hyperscale customers.
Big Tech firms are expected to spend more than US$700bil on AI infrastructure this year, up from around US$400bil in 2025.
Broadcom plans to ship 10GW worth of compute capacity next year and plans “a lot more” in 2028, Tan said during the earnings call.
“The 2Q semiconductor revenue from AI of US$10.8bil grew 143% year-on-year, above our forecast, driven by increasing demand for custom AI accelerators and AI networking,” he said in a statement. — Reuters
