Shares of the chipmaker Broadcom Inc. came crashing down to Earth in late trading today after it reported weaker-than-expected second-quarter revenue.

The stock fell a bit initially, and then much more after Chief Executive Hock Tan declined to raise the company’s full-year guidance for artificial intelligence chip sales beyond the current $100 billion forecast range.

Broadcom, which has regularly blown away Wall Street’s forecasts in recent quarters, struggled to impress today. The company reported earnings before certain costs such as stock compensation of $2.44 per share, edging past the Street’s target of $2.40 per share.

However, revenue came to just $22.19 billion, up 48% from a year earlier but below the $22.27 billion analyst consensus estimate. It was the first time the company came up short of the Street’s targets since December 2024, following a series of impressive quarters driven by demand for AI processors such as Google LLC’s tensor processing units.

The company did at least increase its bottom line by an impressive margin, with net income coming to $9.31 billion at the end of the quarter, up from $4.96 billion in the year-ago period.

For the current quarter, Broadcom said it’s anticipating sales of around $29.4 billion at the midpoint of its guidance range, which is above the Street’s consensus estimate of $28.53 billion. However, investors couldn’t look past the revenue miss, and Broadcom’s stock fell almost 14% in extended trading. It’s still up about 38% in the year to date, surpassing the Nasdaq index’s 16% gain so far this year. Since the end of 2022, the company’s shares have increased ninefold amid rampant demand for AI chips.

Broadcom has become one of the biggest beneficiaries of the AI boom because it helps some of the biggest cloud infrastructure providers and technology firms to design and develop custom AI processors. It owns a lot of the intellectual property, essential technologies and expertise required to design sophisticated semiconductors, and has become a key partner to just about anyone looking to avoid relying too heavily on Nvidia Corp.’s graphics processing units.

In the last year or so it has gained even more attention as AI companies like Anthropic PBC and OpenAI push to develop their own custom AI processors. In December, the company reported that Anthropic had placed a $10 billion order for custom silicon.

On a conference call with analysts, Tan said that Broadcom now has six customers for custom chips, including Anthropic, OpenAI, Google and Meta Platforms Inc., and that those are the main driving force behind its AI revenue growth. Many investors had hoped he would raise the company’s AI chip revenue forecast, as he has in previous quarters, but he let them down today. “We expect this momentum to continue into fiscal year 2027 and reiterate our AI semiconductor revenue guidance to be in excess of $100 billion,” Tan said.

Tan added that the company also plans to sell “chips only” to some customers, rather than the fully integrated AI systems it has traditionally sold. That means it will only sell the chips themselves, and not the server systems and networking infrastructure that usually go with them.

Nonetheless, Broadcom’s AI revenue growth was impressive, with sales more than doubling from a year ago, to $10.8 billion. Tan added that AI revenue is expected to grow to around $16 billion in the current quarter. “The bookings that are coming are not for immediate delivery,” Tan said. “Some they hope to have, but the reality they all accept is they need to align quite a few other things in place before they can deliver.”

All told, Broadcom’s semiconductor solutions business delivered $15.1 billion in sales, including networking infrastructure and its older legacy chips for Wi-Fi and automotive customers. That surpassed the Street’s target of $14.72 billion.

Broadcom also sells enterprise software through its infrastructure solutions group, which was bolstered by the acquisition of VMWare in 2023. That unit delivered $7.18 billion in revenue, up 9% from a year earlier but shy of the Street’s forecast of $7.32 billion.

Photo: Sarbjeet Johal (Stackpane)/YouTube