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Broadcom ( AVGO) stock fell Thursday after the tech giant delivered a beat-and-raise fiscal second-quarter report but missed lofty estimates with its AI chip sales targets.
The Palo Alto, Calif.-based company late Wednesday forecast $16 billion in artificial intelligence chip sales for its fiscal third quarter ending Aug. 2. However, Wall Street analysts were looking for $17.2 billion.
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In its fiscal second quarter ended May 3, Broadcom generated $10.8 billion in AI semiconductor revenue, up 143% year over year.
Broadcom predicted AI chip sales of $56 billion for fiscal 2026, which was below views for $57.6 billion. In fiscal 2025, Broadcom's AI chip sales totaled $20 billion.
Further, Broadcom kept its fiscal 2027 AI chip sales goal unchanged at "in excess of $100 billion," while analysts are modeling $114 billion.
In morning trades on the stock market today, Broadcom tumbled more than 14% to 411.80. On Wednesday, ahead of the fiscal Q2 report, Broadcom stock notched a record high of 495.
With the stock slide Thursday, Broadcom fell below the 414.61 buy point of its April 22 breakout, according to IBD MarketSurge charts.
On a conference call with analysts, Broadcom Chief Executive Hock Tan said demand for AI data center processors and networking "is simply insatiable."
Broadcom Stock Downgraded After Report
Broadcom has four big customers for its custom AI chips: Alphabet's ( GOOGL) Google, Meta Platforms ( META), Anthropic and OpenAI. It also has two unnamed customers.
Investment firm Macquarie downgraded Broadcom stock to neutral from outperform and lowered its price target to 437 from 513. It cited a move by Google to develop AI chips in house. Macquarie said it expects Broadcom's market share to "decline meaningfully" in 2027 as a result.
UBS analyst Timothy Arcuri reiterated his buy rating on Broadcom stock but trimmed his price target to 485 from 490.
"Orders were very strong, but Broadcom didn't raise AI revenue for either fiscal 2026 or 2027 (disappointing especially when compared to peers) with the issue being mostly one of supply," Arcuri said in a client note. "Ultimately, there is not a ton here to sway our view materially in either direction as new agreements continue to expand custom ASIC (application-specific integrated circuit) engagements."
Broadcom Nabs Over A Dozen Price-Target Hikes
Meanwhile, at least 14 Wall Street firms raised their price targets on Broadcom stock after the company's fiscal Q2 report.
Late Wednesday, Broadcom reported adjusted earnings of $2.44 a share, up 54% year over year, on sales of $22.19 billion, up 48%. Analysts polled by FactSet had expected earnings of $2.40 a share on sales of $22.13 billion in fiscal Q2.
Broadcom has posted four straight quarters of accelerating sales growth, with faster growth forecast for the next two quarters.
For the current quarter, Broadcom forecast revenue of $29.4 billion, up 84% from the same quarter last year. Analysts had been modeling for fiscal Q3 sales of $28.25 billion.
"Expectations aside, these are very strong results, and we expect the outlook to remain conservative," Morgan Stanley analyst Joseph Moore said in a client note. He kept his overweight rating on Broadcom stock and upped his price target to 502 from 485.
CEO Tan said he expects the company's momentum to carry into fiscal 2027. He added that Broadcom has visibility to fiscal 2028. He predicted "substantial growth" from fiscal 2027.
universal chart
(AVGO)
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Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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