Broadcom's Record Quarter Meets a Brutal Selloff, but Wall Street Sees a Bargain

Despite 48% revenue surge and 143% AI chip growth, Broadcom stock dropped 15% after guidance fell short of whisper expectations and a strategic pivot to custom chips. Analysts upgrade, calling selloff an entry point.

Broadcom Inc. delivered its strongest quarterly results on record last week, only to watch its stock crater by roughly 15% in a single session. The disconnect between operating performance and market reaction was stark: revenue jumped 48% to $22.2 billion, AI chip sales exploded 143% to $10.8 billion, and adjusted EBITDA hit $15.2 billion — a margin of 69%. Yet the selloff erased about $350 billion in market capitalization, dragged down the Philadelphia Semiconductor Index by 5.21%, and pulled rivals AMD, Intel and Samsung into the red.

The trigger was a combination of guidance that fell short of whisper expectations and a strategic pivot that surprised the Street. For the third quarter, Broadcom’s management projected AI chip revenue of $16.0 billion — a year-over-year gain of more than 200% — but analysts had been anticipating $17.2 billion. CEO Hock Tan also left the company’s fiscal 2027 target of more than $100 billion in AI chip revenue unchanged, disappointing speculators who had hoped for an upward revision. To make matters worse, Tan announced that Broadcom would stop selling fully integrated AI systems and instead focus exclusively on custom-designed chips, walking back a previously stated ambition. The shift pushed gross margin down 230 basis points to 77.1%, reflecting the higher mix of lower-margin custom chips.

The stock closed the week at €336.75, a 12.25% decline, and now sits well below its all-time high of €429.60 set on June 3 — the very day the quarterly numbers were released. Despite the rout, the shares remain up roughly 13% year to date and nearly 50% over the past twelve months, with the 52-week low of €213.80 far in the rearview mirror.

Within 24 hours of the plunge, a wave of buy-side institutions moved aggressively to upgrade the stock. Jefferies analyst Blayne Curtis raised his price target to $550 from $500, calling the selloff an entry point. JPMorgan lifted its target to $580 and reaffirmed Broadcom as a top pick in semiconductors. BNP Paribas Exane went further, setting a target of $640. Mizuho, Deutsche Bank, Morgan Stanley and Goldman Sachs also chimed in with targets ranging from $502 to $530. The consensus rating among 47 analysts polled by S&P Global stands at "Strong Buy," with an average price target of $511. Erste Group upgraded the stock from Hold to Buy on Friday, citing Broadcom’s above-average growth pace relative to sector peers.

Tech investor Dan Niles, however, warned that the correction may have further to run. He noted that chip stocks had rallied sharply since March and that market expectations had simply overshot reality. Keybanc Capital Markets analyst John Vinh echoed the view, calling the pullback a long-overdue recalibration. But fundamental bulls point out that Broadcom’s existing long-term supply agreements with Google, Anthropic, OpenAI and Meta remain intact, and that fresh AI chip orders worth $6 billion have been added. Larger deliveries under those contracts are slated to begin in fiscal 2027.

A leadership change adds another layer of transition. On June 12, Amie Thuener will take over as chief financial officer from Kirsten Spears, who is retiring after 12 years at Broadcom. Thuener joins from Alphabet, where she served as vice president and chief accounting officer. Spears will remain as a consultant for nine months.

The next major test comes on September 2, 2026, when Broadcom reports fiscal third-quarter results. By then, Tan will have to demonstrate that the new chips-only strategy can deliver on the $100 billion revenue target — or risk another round of disappointment. For now, the market is betting that the selloff was overdone, but the gap between last week’s high of €429.60 and the current price of €336.75 suggests investors still need convincing.