KEY POINTS
- Broadcom shares fell nearly 14% in after-hours trading after Q2 revenue of $22.19 billion missed the $22.27 billion Wall Street consensus, even as AI chip revenue hit a record $10.8 billion, up 143% year over year.
- The software infrastructure unit posted $7.18 billion against a $7.32 billion expectation, and CEO Hock Tan declined to raise full-year AI guidance above $100 billion, disappointing investors who had priced in an upward revision.
- CrowdStrike's simultaneous guidance miss adds to the negative read-through for tech; traders should watch whether AVGO holds $480 support when regular trading resumes Thursday.
Broadcom posted record AI chip revenue and still lost nearly 14% of its market value in the space of an hour. The chipmaker reported fiscal second-quarter revenue of $22.19 billion on Wednesday evening, a 48% increase from a year earlier but $80 million short of the $22.27 billion analysts had expected. In after-hours trading, shares cratered to $413, down from a regular-session close of $479.23, erasing roughly $90 billion in market capitalization before most retail traders had finished dinner.
The paradox at the center of the AVGO sell-off is that the company's AI business has never been stronger. Revenue from artificial intelligence chips surged 143% year over year to $10.8 billion, a record that beat the company's own internal forecast. Hyperscaler customers — the Googles, Metas, and Microsofts of the world — continue to pour capital into custom silicon, and Broadcom remains their primary design partner. By any reasonable measure, the AI franchise delivered.
Where the Miss Happened
The shortfall came from Broadcom's software infrastructure segment, which generated $7.18 billion against a consensus of $7.32 billion. This business, anchored by the VMware acquisition completed in late 2023, has been Broadcom's recurring-revenue stabilizer — the predictable half of the portfolio that was supposed to provide a floor while AI scaled. When that floor cracked, investors who had been stretched to a 35-times forward earnings multiple found themselves without a safety net.
CEO Hock Tan compounded the damage during the earnings call by declining to raise the company's full-year AI chip revenue guidance beyond the existing $100 billion forecast. Analysts at Morgan Stanley and Bernstein had been modeling upward revisions in the range of $105 billion to $110 billion. Tan's unwillingness to move the number suggested either supply constraints, customer timing shifts, or — the bear case — early signs that hyperscaler capex growth is plateauing. None of those explanations are comforting at current valuations.
The CrowdStrike Amplifier
Broadcom's miss did not arrive in isolation. CrowdStrike, reporting the same evening, posted record Q1 net new ARR of $256 million and announced a four-for-one stock split, but shares still dropped more than 11% after the company issued soft guidance for the second quarter. The combined signal from two bellwether tech names missing on forward-looking metrics set the tone for a risk-off Thursday in the sector.
The read-through to the broader semiconductor complex matters. Nvidia, which rallied 5% on June 2 after unveiling its RTX Spark superchip at Computex, now faces a market where the AI narrative is being questioned rather than celebrated. Advanced Micro Devices and Micron, which have ridden the same capex wave, are vulnerable to the same valuation compression that hit AVGO. The Philadelphia Semiconductor Index entered Thursday trading at 28 times forward earnings, a level that historically precedes corrections of 10% or more.
Holding the Line at $480
The immediate question for AVGO traders is whether Thursday's regular session confirms the after-hours damage or finds a bid. The $480 level, which served as support during the May consolidation, is the first test. A close below that would put the stock's 200-day moving average near $440 in play. On the upside, any signal from management that the software miss was a timing issue rather than a structural problem could trigger a snapback toward $500. Broadcom's next scheduled investor event is at the Bank of America Global Technology Conference on June 10, and that will be the first opportunity for Tan to walk back the conservative guidance. Until then, the stock trades on Thursday's momentum, and the momentum after a 14% after-hours drop is unambiguously negative.
