Broadcom shares fall after revenue forecast disappoints investors

In short: Broadcom’s share price fell sharply after the company gave a revenue forecast that was not as high as some investors hoped.

What happened

Broadcom, a major chip company, lost more than $250bn in market value in after-hours trading on Wednesday. Its shares fell as much as 15% after the company shared its expected revenue for the current quarter.

Broadcom said it expects $29.4bn in revenue for the quarter. That was above the average analyst estimate of $28.2bn, but it was below the most optimistic forecasts. Investors reacted because the company’s stock had risen quickly in the days leading up to the update.

The company reported $22.2bn in total revenue for its latest quarter, which was in line with expectations. Chip revenue was $15bn, slightly above the $14.8bn that analysts expected.

Broadcom has become an important supplier for AI infrastructure, meaning the equipment used to train and run AI systems (like the powerful computers behind chatbots). It competes with Nvidia and AMD, and it has named customers for custom AI chips including Google, Meta, OpenAI, and Anthropic.

Some investors were hoping Broadcom would raise its longer-term expectations. Chief executive Hock Tan repeated a previous target of “well over $100bn” in AI chip revenue in 2027, rather than increasing it.

Why it matters

Big swings like this show how sensitive AI-related stocks are to small changes in expectations. It is a bit like a restaurant that is still busy, but gets punished because it did not promise to be even busier next month. The reaction also highlights questions about how long large tech companies can keep spending heavily on AI data centers and chips.

Source: Financial Times