Broadcom Drops 14% After Earnings as AI Revenue Doubles, but Wall Street Wanted More Than Perfection

Broadcom delivered another quarter of explosive AI-driven growth. Investors still sold the stock.

Shares of Broadcom (NASDAQ: AVGO) fell nearly 14% in after-hours trading after the company reported fiscal second-quarter results that largely beat expectations but failed to clear Wall Street’s increasingly elevated AI growth bar.

The selloff highlights a growing trend across the semiconductor sector: strong results are no longer enough. Investors now demand accelerating guidance, higher AI forecasts, and flawless execution from the biggest beneficiaries of the AI infrastructure boom.

Broadcom closed Wednesday at $479.23, valuing the company at well over $2 trillion before the earnings-driven decline.

Broadcom Delivers Another Massive AI Quarter

The numbers were impressive by almost any historical standard.

Key Q2 FY2026 highlights:

• Revenue: $22.19 billion, up 48% year-over-year
• Adjusted EPS: $2.44, ahead of estimates near $2.40
• AI semiconductor revenue: $10.8 billion, up 143% year-over-year
• Semiconductor solutions revenue: $15.0 billion, up 79%
• Infrastructure software revenue: $7.18 billion, up 9%
• Net income: $9.31 billion, up 88%
• Free cash flow: $10.3 billion, up 60%
• EBITDA margin: 69%

CEO Hock Tan said demand for custom AI accelerators and networking products continues to expand as hyperscalers ramp infrastructure spending.

Broadcom’s AI semiconductor business generated $10.8 billion during the quarter, exceeding management’s own forecast and reinforcing its position as one of the largest beneficiaries of enterprise AI spending.

Why Did AVGO Stock Fall?

The market reaction wasn’t about what Broadcom reported.

It was about what investors expected.

Several factors appear to have driven the sharp decline:

1. AI Guidance Missed Elevated Expectations

Broadcom forecast approximately $16 billion in AI semiconductor revenue for the current quarter.

While that represents more than 200% year-over-year growth, analysts had expected slightly higher numbers.

The company also maintained its long-term target of more than $100 billion in AI semiconductor revenue by 2027 rather than raising it.

For a stock that had surged nearly 40% year-to-date and hit fresh all-time highs before earnings, investors were hoping for another upward revision.

2. Revenue Was Good, But Not Perfect

Broadcom reported revenue of $22.19 billion.

Some Wall Street estimates were closer to $22.27 billion.

The difference was small, but markets currently reward perfection in AI-related stocks.

3. Software Revenue Disappointed

Infrastructure software revenue reached $7.18 billion, below expectations near $7.32 billion.

The VMware business remains highly profitable, but investors were looking for stronger acceleration after Broadcom’s integration efforts.

4. Buybacks Fell Dramatically

One of the more overlooked developments was capital allocation.

Broadcom generated more than $10 billion in quarterly free cash flow but repurchased only about $600 million of stock during the quarter.

That compares with roughly $7.8 billion in buybacks during the previous quarter. Some investors interpreted the shift as a signal that management is conserving capital for future investments, supply commitments, or potential acquisitions.

AI Opportunity Remains Enormous

Despite the post-earnings disappointment, Broadcom’s AI story remains intact.

The company sits at the center of the custom AI chip market, supplying technology used by:

• Alphabet
• Meta Platforms
• OpenAI
• Anthropic

Broadcom also recently benefited from Alphabet’s planned $80 billion AI infrastructure expansion, reinforcing expectations that hyperscale spending remains in full acceleration mode.

Industry estimates suggest Big Tech could spend more than $700 billion on AI infrastructure this year, creating a massive demand tailwind for networking silicon, custom AI accelerators, and data-center connectivity.

Management reiterated plans to ship more than 10 gigawatts of AI compute capacity in 2027 while signaling additional expansion in 2028.

AVGO Technical Analysis: Uptrend Faces First Major Test

Technically, Broadcom remains one of the strongest semiconductor charts despite the after-hours decline.

The stock entered earnings near record highs after a powerful multi-month rally fueled by AI optimism.

Key Technical Signals

• Shares remain up nearly 40% year-to-date
• Stock trades above its 10, 20, 50, 100, and 200-day moving averages
• MACD remains on a buy signal at 17.45
• ADX at 29.0 confirms a healthy uptrend
• Volume surged around earnings as investors repositioned

The broader trend remains bullish, but the earnings reaction may trigger the stock’s first meaningful consolidation phase in months.

RSI and MACD

The RSI at 73.3 remains in overbought territory, while the CCI reading above 240 signals an extended rally. Momentum indicators suggest the stock had become crowded heading into earnings.

Meanwhile, MACD remains firmly positive, indicating the longer-term uptrend is still intact despite the sharp post-market decline.

The setup suggests a momentum reset rather than a confirmed trend reversal.

Key Support and Resistance Levels

The $430-$440 zone will likely become the first major technical battleground. Holding above that area would preserve the broader bullish structure.

Long-Term Outlook: AI Demand Remains the Core Driver

The biggest takeaway from Broadcom’s earnings report is not the revenue miss.

It is that AI demand continues growing at a pace rarely seen among trillion-dollar technology companies.

AI semiconductor revenue rose 143%. Q3 AI revenue is projected to reach $16 billion. Management still expects the AI opportunity to exceed $100 billion annually within the next few years.

Broadcom’s partnership network, custom-chip leadership, networking portfolio, and VMware software assets give it exposure to multiple layers of the AI stack.

The market punished the stock because expectations had become exceptionally high.

Fundamentally, however, Broadcom remains one of the most important infrastructure providers powering the global AI buildout.