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Tech Stocks
Why Broadcom’s stock is falling so hard after earnings
The chip company declined to increase its AI revenue outlook for next year ‘in a market environment clamoring for material beats and raises’
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Published: June 4, 2026 at 9:32 a.m. ET
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Broadcom’s stock had been priced for perfection after a strong recent rally, but the company’s earnings commentary didn’t live up to the hype — sending shares down 14% shortly after Thursday’s open.
There were a few items for investors to nitpick. For one, the chip maker’s
guidance for AI chip revenue to jump more than 200% in the current quarter to $16 billion fell below Wall Street’s target, and Broadcom merely reiterated its outlook for $100 billion in AI chip revenue next year, instead of raising it.
Maintaining growth expectations “in a market environment clamoring for material beats and raises is likely to disappoint,” TD Cowen analyst Joshua Buchalter said.
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There is probably upside to be recognized for 2027, he said in a Wednesday note, but Broadcom’s “seeming unwillingness to lean into” it will likely weigh on the stock in the near term. So will the fact that gross margins are coming down due to the balance of revenue between Broadcom’s software and chips businesses and uncertainty over some of its custom chip projects.
Evercore ISI analyst Mark Lipacis said Broadcom’s earnings commentary validated his view that the company is losing part of its business with Google to MediaTek. The tech giant has co-developed its tensor processing units with Broadcom for more than a decade but has reportedly been looking to work with the Taiwanese chip designer on future generations.
“We believe these dynamics are likely to mute [near-term] upside as investors will prefer clean stories,” Lipacis said, as the PHLX Semiconductor Index
has shot up 96% so far this year. Broadcom shares have advanced 38% on the year and 51% over the past three months.
Still, Buchalter said Broadcom will likely support about 10 gigawatts of custom chip deployments across its customer base next year, which would add “material upside” to its AI chip revenue. Additionally, Broadcom’s VMware software business gives it an opportunity to benefit from surging demand for central processing units, he said. The current agentic AI wave and shift to inference is driving up demand for the processors.
Bernstein analyst Stacy Rasgon said that 2027 performance will likely be weighted toward the back half of the year, when Broadcom’s custom chip projects ramp up, and that could lead to “a potentially materially higher run-rate into 2028.” For now, Broadcom will see stronger growth in its software and non-AI chip business, he said in a Thursday note.
“We suspect the shares may take a pause for the next couple of quarters,” Rasgon said. “But the story gets interesting again once we enter 2027.”
Copyright ©2026 MarketWatch, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
About the Author
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Britney Nguyen is a tech reporter covering Nvidia, chips and AI. You can find her on X at @britneycath.
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