Broadcom’s Perfection Premium: When a 143% AI Revenue Surge Triggers a 13% Wipeout

Broadcom posts 48% revenue growth and AI-chip sales doubling, but stock drops 13% as investors demand upward guidance revisions.

Broadcom delivered a near-flawless set of second-quarter results — revenue up 48%, AI-chip sales more than doubled, and earnings per share squeaking past estimates. Wall Street’s response was an emphatic selloff that erased roughly 13% of the stock’s value in two sessions. The chipmaker has become the poster child for a market that now demands not just strong execution but an endless series of upward revisions.

The numbers themselves read like a textbook growth story. For the fiscal second quarter ended May 3, 2026, Broadcom posted $22.19 billion in revenue. The semiconductor division surged 79% to $15.0 billion, while the AI-chip segment contributed $10.8 billion — a 143% year-over-year leap. Adjusted earnings per share came in at $2.44, topping the consensus estimate of $2.40. CEO Hock Tan described demand for XPUs and networking solutions as “insatiable.”

Guidance for the current quarter was equally robust. Broadcom expects third-quarter revenue of roughly $29.4 billion, an 84% increase from a year earlier. AI-chip revenue is forecast to reach $16 billion, more than triple the prior-year period. Yet investors focused on what Tan didn’t say: he reaffirmed the full-year AI-chip target of $56 billion and the 2027 goal of over $100 billion, but offered no upgrade. For a stock that had touched a 52-week high of $429.60 on June 3, the absence of a catalyst was enough to trigger a violent reversal. By the end of the week, Broadcom shares had settled at €336.75, roughly 21% below that peak.

The selloff also exposed weakness in Broadcom’s infrastructure software arm, which grew just 9% — a stark contrast to the explosive semiconductor unit. The combination of a stagnant guide and a sluggish software line convinced some traders that the valuation had run ahead of reality, even if the business itself continues to fire on all cylinders.

Analysts, however, remain broadly constructive. Of the 26 covering the stock, 42% rate it a “Strong Buy” and another 46% a “Buy.” The average price target stands at $501.58, implying significant upside from current levels. Erste Group upgraded the shares from Hold to Buy after the pullback, viewing the dip as a buying opportunity in a secular growth story. Some strategists argue that the $100 billion-plus 2027 target is itself conservative, given the accelerating buildout of AI infrastructure by hyperscalers.

Technically, the stock now trades just below its 50-day moving average of €340.86 but remains about 10% above its 200-day moving average. The relative strength index has fallen to 41, signaling oversold conditions — a level that has historically drawn bargain hunters.

Broadcom’s six core AI customers — including Anthropic, Google, Meta, and OpenAI — continue to drive demand. For the third quarter alone, AI-chip revenue guidance of $16 billion represents more than a tripling from the prior year. The company’s full-year AI chip outlook of $56 billion implies growth of roughly 180%.

The market’s reaction underscores a dilemma gripping the tech sector: once stocks are priced for perfection, even outstanding performance can disappoint. The question now is whether this is a healthy correction in a long-term bull run or a sign that AI valuations have overshot. For Broadcom, the numbers remain formidable — but in a market demanding constant escalation, being very good may no longer be enough.