Business

Hock Tan's Broadcom Shares Fall Despite Solid Sales and Robust AI Chip Forecast
By Reuters | 03 Jun, 2026

The chipmaker in competition with Nvidia reported Q2 revenue of $22.19 billion, slightly below Wall Street estimates of 22.19 billion but left intact its earlier2027 $100 billion sales forecast.

Chipmaker Broadcom missed Wall Street expectations for second-quarter revenue on Wednesday and its top executive left a previous 2027 sales forecast unchanged, sending its shares down more than 13% in extended trading.

Second-quarter revenue of $22.19 billion missed estimates of $22.27 billion, as Broadcom races with Nvidia whose dominant graphics processing units remain the industry standard for AI workloads.

Broadcom also said it expects AI chip revenue of $16 billion in its current third quarter, slightly below estimates of $16.36 billion, according to analysts polled by Visible Alpha.

Chief Executive Officer Hock Tan said Broadcom now expects to ship more than 10 gigawatts' worth of AI chips in 2027 - a slight increase from previous estimates - but stuck to the company's long-range forecast of $100 billion 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 $10 billion in revenue in 2029, and forecast second-quarter revenue above estimates.

The boom in inference - the process by which models respond to user queries - has made custom chips crucial to the industry, driving more orders for advanced processors and intensifying competition.

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 third-quarter revenue of about $29.4 billion, compared with analysts' average estimate of $28.54 billion, according to data compiled by LSEG.

CORE BUSINESS REMAINS STRONG

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 $700 billion on AI infrastructure this year, up from around $400 billion in 2025.

As the AI industry evolves rapidly, machine learning capabilities and requirements vary greatly from company to company, resulting in large cloud companies building their own processors to slash costs and personalize workloads.

Broadcom plans to ship 10 gigawatts worth of compute capacity next year and plans "a lot more" in 2028, Tan said during the earnings call.

"Q2 semiconductor revenue from AI of $10.8 billion grew 143% year-over-year, above our forecast, driven by increasing demand for custom AI accelerators and AI networking," he said in a statement.

(Reporting by Zaheer Kachwala and Anhata Rooprai in Bengaluru and Stephen Nellis in San Francisco; Editing by Arun Koyyur and Cynthia Osterman)