Broadcom AI Revenue Surges 143% to $10.8 Billion as Shares Fall on Raised Expectations

Broadcom posted fiscal second-quarter revenue of $22.19 billion, up 48% year on year, with AI semiconductor sales reaching a record $10.8 billion, a 143% increase. Shares fell nearly 14% in after-hours trading on June 3 as investors concluded the forward guidance, while strong in absolute terms, did not justify current valuations.

Record AI Revenue, Softer Software

AI chip revenue accounted for 49% of Broadcom's total revenue for the quarter ended May 3, 2026, marking a structural shift for a company that built its position primarily through networking hardware and enterprise software.

The miss came from infrastructure software. Broadcom's software division, which absorbed the VMware acquisition completed in late 2023, posted $7.18 billion against analyst expectations of $7.32 billion. That shortfall, modest in isolation, was enough to drag the stock in a market that had priced perfection.

For Q3 FY2026, Chief Executive Hock Tan guided consolidated revenue at $29.4 billion, up 84% year on year, above the Wall Street consensus of $28.53 billion. AI semiconductor revenue alone is expected to exceed $16 billion in Q3, representing over 200% year-on-year growth.

• AI chip revenue (Q2): $10.8 billion (+143% year on year)
• Infrastructure software (Q2): $7.18 billion (vs $7.32 billion expected)
• Total Q2 revenue: $22.19 billion (+48% year on year)
• Q3 revenue guidance: $29.4 billion (+84% year on year, above consensus)
• Q3 AI chip guidance: over $16 billion (>200% year on year)
• AI booking backlog: $73 billion from six confirmed XPU customers
• After-hours share reaction: -14%

The Valuation Problem

The 14% after-hours drop reflects how AI semiconductor stocks are now priced.

Broadcom entered the quarter trading at around 45 times forward earnings. At that multiple, the market had already priced in years of above-consensus growth. A record quarter without an upgrade to the full-year AI target gave investors a reason to take profits. Chief Executive Hock Tan left the $100 billion annual AI chip revenue target unchanged.

The same pattern played out with Nvidia in May. Q1 FY2027 revenue came in 77% above the prior year, beating estimates, and the stock declined in the days following the print. Across the AI semiconductor trade, extraordinary growth has become the baseline, not the catalyst.

Portfolio Implications

Broadcom is a major component of the S&P 500 and Nasdaq 100. A single-session move of 14% affects passive index funds and all investors with broad equity exposure, not only those who hold the stock directly.

The demand signal from Broadcom's results is unambiguous. A $73 billion backlog from six hyperscaler XPU customers confirms that AI infrastructure spending is accelerating. Consensus estimates for global AI capital expenditure in 2026 stand above $800 billion, supported by confirmed commitments from Apple, Meta, Alphabet, and Microsoft.

The live question for portfolio investors is not whether that spending is real. It is whether current semiconductor valuations have already absorbed it. Any deceleration in the AI buildout, from energy constraints, regulatory intervention, or a shift in hyperscaler priorities, would be felt sharply across equity portfolios weighted toward AI semiconductor names.

What to Watch

June 5 brings US May nonfarm payrolls, which will shape expectations for the Federal Reserve's rate path. The ECB is widely expected to raise its deposit rate 25 basis points at its June 11 meeting. Both datapoints will set the discount rate context for AI equity valuations already stretched by multi-year growth assumptions.