Shares of U.S. semiconductor company Broadcom plunged in after-hours trading on Tuesday (local time). Although the company reported quarterly results that exceeded market expectations, the move is interpreted as a wave of profit-taking triggered by assessments that its artificial intelligence (AI) business growth outlook fell short of investor expectations.
According to Yahoo Finance on Wednesday (local time), Broadcom said its revenue for the second quarter of fiscal year 2026 (February 2 to May 3) reached $22.187 billion. The figure marked a 48% increase from a year earlier, exceeding the Wall Street estimate of $22.12 billion compiled by Visible Alpha. Adjusted earnings per share (EPS) also rose 54% to $2.44, surpassing the market estimate of $2.40.
The strong results were led by the AI business. Revenue in the AI semiconductor segment surged 143% from a year earlier to $10.8 billion, continuing its growth streak for a 13th consecutive quarter. Operating cash flow stood at $10.49 billion and free cash flow (FCF) reached $10.26 billion, accounting for 46% of total revenue.
But the market response was cold. According to the Financial Times (FT), Broadcom shares fell as much as 15.4% in after-hours trading that day. If this decline holds into the regular session, the FT estimates the market capitalization reduction would reach approximately $349 billion. The FT projected that it "could be recorded as the third-largest single market capitalization wipeout in U.S. corporate history."
What dampened investor sentiment was the forward earnings outlook. Broadcom offered quarterly revenue guidance of $29.4 billion. While this exceeds the market consensus of $28.2 billion, assessments emerged that it fell short of the highest forecast some investors had expected. Melissa Otto, head of research at Visible Alpha, analyzed that "the AI revenue guidance was presented as somewhat weak," adding, "this appears to be the factor that pulled the stock down in the aftermarket."
Profit-taking demand following the recent surge in the share price was also cited as a factor that amplified the decline. Daniel Newman, CEO of market research firm Futurum Group, said, "Considering the situation where the stock rose sharply as expectations for custom AI chips expanded, Broadcom delivered another excellent quarterly result," while explaining, "this is a typical case where the stock rose excessively ahead of the earnings announcement, and once the actual announcement came out, investors moved to take profits." He added, "Investors would have wanted to hear that the company's target of $100 billion in AI chip revenue by 2027 had increased to a meaningful level."
The FT diagnosed that "investors have poured massive amounts of money into related companies amid expectations that AI infrastructure investment will continue to expand over the next two years," adding, "this stock plunge reflects the disappointment of investors who had expected Broadcom's long-term earnings outlook to continue being revised upward."
