Shares cratered as investors punished a record quarter that somehow wasn't record enough. Broadcom closed down 12.6% Thursday, erasing $280 billion in market value — a drop that ranks near the top in recent megacap history, trailing only Nvidia and Microsoft in single-stock losses since 2019 . The paradox: the underlying business has never been stronger. The message from Wall Street is brutally clear — when a stock is priced for perfection, even a great quarter can trigger a selloff.
The Numbers Were Good; the Outlook Wasn't Good Enough
Broadcom earned $2.44 per share versus the $2.40 analysts expected, on revenue of $22.19 billion against a $22.27 billion estimate . GAAP profit surged 85% year-over-year and free cash flow jumped 60% . But the stock sold off because Broadcom's Q3 AI chip revenue forecast of $16 billion fell well below analysts' expectations of $17.2 billion . That $1.2 billion guidance gap was all that mattered.
CEO Hock Tan Held the Line on a Full-Year Target the Street Had Already Blown Past
Tan didn't raise his forecast for 2026 AI semiconductor sales . He maintained the full-year figure at $56 billion, also falling short of estimates . For fiscal 2027, management reiterated expectations of more than $100 billion in AI semiconductor revenue . The numbers are enormous, but investors had already baked in an upgrade — and didn't get one.
The Software Business Quietly Missed, Too
Infrastructure software revenue of $7.18 billion grew 9% year-over-year but fell short of the $7.32 billion expected by analysts . This matters because Broadcom's software arm — largely the VMware business acquired in 2023 — is supposed to provide steady, high-margin cash flow that cushions the lumpier chip business. A miss there removed one safety net.
A Strategy Shift Adds Uncertainty
Tan said Broadcom would now offer "chips only," instead of the complete integrated AI systems it had previously planned . That narrows the company's revenue scope per customer at a moment when reports point to a key customer shifting some work toward a rival chip designer . Competitors like Marvell are chasing the same custom-chip dollars .
The core tension: this is a strong business priced at a level that demands near-flawless execution . Even after the selloff, Broadcom trades at roughly 37 times forward earnings, above its three-year average . With AI expectations only rising, the margin for error remains razor-thin.