Broadcom Inc. shares tumbled dramatically in pre-market trading, dropping roughly 12.7% to $418.50 following the release of the company’s fiscal second-quarter 2026 earnings after Wednesday’s market close. The move accelerated into extended hours as investors reacted to guidance that fell short of hopes for a higher trajectory in artificial intelligence chip sales.
At the center of the decline was Broadcom’s third-quarter AI semiconductor sales projection of $16 billion, which came in below analysts’ expectations of $17.2 billion. On the software side, the infrastructure software segment generated $7.2 billion in revenue, a 9% increase year over year, but that figure landed beneath a higher Street whisper near $7.32 billion and added to the negative after-hours tone.
Notably, the headline quarterly numbers were strong. Broadcom reported revenue of $22.2 billion for Q2 FY2026, up 48% compared with the same quarter a year earlier. On a GAAP basis, net income was $9.3 billion, with GAAP diluted earnings per share of $1.91. On a non-GAAP basis, net income reached $12.1 billion and non-GAAP diluted EPS was $2.44. The company also disclosed AI semiconductor revenue of $10.8 billion for the quarter, a 143% year-over-year increase.
Despite those metrics, investors had been looking for more forward-looking uplift tied to the company’s AI opportunity. CEO Hock Tan did not raise the company’s full-year artificial intelligence revenue target and reiterated management’s outlook for fiscal 2027 AI semiconductor revenue to be "in excess of $100 billion." That reiteration, rather than an upward revision, disappointed market participants who had been expecting a more ambitious update.
We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion.
Compounding investor uncertainty was a shift in product positioning: Broadcom indicated it would supply "chips only," foregoing previously suggested plans to deliver integrated AI systems end-to-end to customers. That strategic change prompted questions about the company’s avenue for capturing further value within AI deployments.
Analysts reacted with mixed signals. Jefferies analyst Blayne Curtis raised his price target for Broadcom (AVGO) to $550 from $500 while keeping a Buy rating on the stock. Bernstein’s Stacy Rasgon characterized the guidance shortfall on AI as the principal factor pulling the shares lower, despite the strong underlying quarterly performance.
The market context amplified the company-specific pressure. Major equity benchmarks were weaker as the stock sold off - the S&P 500 was down about 0.7%, the Dow Jones fell roughly 1.2% and the NASDAQ slipped around 0.9%. Heightened geopolitical tensions in the Middle East were cited as a broader headwind; a recent flare-up in the U.S.-Iran conflict, involving retaliatory strikes by Tehran targeting U.S. bases in Kuwait and Bahrain, contributed to risk-off sentiment that weighs particularly on high-multiple technology names.
Broadcom had been trading near a 52-week high of $495 in the session before earnings. The combination of a recent rally into the report, guidance that confirmed rather than exceeded lofty expectations, and the AI guidance ceiling now plainly in view prompted pre-market selling and a reassessment of the premium multiple investors had been willing to pay.
Key takeaways from the report and market reaction include the following: while Broadcom delivered robust revenue and profit growth—and very strong year-over-year AI semiconductor growth—the lack of an upward revision to multi-year AI revenue goals, a conservative near-term AI sales guide for the September quarter, and a move to a "chips only" strategy were sufficient to trigger a sharp reset in the stock price, particularly against a risk-averse market backdrop.