Broadcom shares tank 12% afterhours after sales guidance disappoints Wall Street

Shares of Broadcom Inc. plunged in extended trading on Wall Street on Wednesday, June 3, after the company's AI chip revenue guidance for the quarter and the full fiscal disappointed the street.

What Forecast Did Broadcom Give?

According to Broadcom, its revenue from the sale of AI semiconductors will be $16 billion for the third quarter of their ongoing fiscal. The quarter will end in July. The figure was lower than the average estimate of analysts, which stood at $17.2 billion

For the full year, Broadcom expects to sell AI chips worth $56 billion, again falling short of expectations of $57.6 billion. Broadcom's fiscal year ends in October.

What Accelerated The Fall In Broadcom?

The fall in Broadcom's shares was also accelerated after the stock had gained for four days in a row prior to the results before ending Wednesday's regular trading session lower.

Broadcom shares had gained 14% over the last four sessions, adding over $250 billion to their market capitalization.

Even though Broadcom has signed and expanded long-term deals with Alphabet, Anthropic and Meta, the question asked by the street is how much revenue will be recognized each quarter, contrary to being accounted for in a multi-year backlog.

How Did Broadcom Fare In Q2

For the second quarter that just concluded, Broadcom reported sales of $22.2 billion, in-line with expectations of $22.1 billion.

Sales were up 48% on a year-on-year basis.

AI semiconductor sales were at $10.8 billion, also in-line with expectations of $10.7 billion.

Details Of Broadcom-OpenAI Partnership

Broadcom has already begun to deliver chips to OpenAI and is on track for production later this year.

The company has a contract to deploy 1.3 GW capacity in 2027, as part of an agreement that was announced last year to deploy 10 GW by 2029.

Broadcom will also be deploying 3 GW of computing power for Meta through the end of 2028.

Before the results announcement, Broadcom shares were up 38% for the year so far.