AVGO Stock Drops After-Hours After Q3 Revenue Outlook Fails To Impress

• Reports Q2 revenue of $22.2 billion, up 48% year-on-year (YoY), marginally beats estimates of $22.12 billion. 
• Q2 earnings came in at $2.44 per share, in-line with estimates. 
• 43 analysts rate the stock ‘buy’ with an average 12-month price target of $486.85, as per Koyfin.  

Broadcom (AVGO) share price tanked about 6% after-hours after the semiconductor infra maker’s Q3 revenue outlook failed to impress investors, coming in below the higher end of analyst expectations. 

Broadcom reported adjusted earnings of $2.44 a share for the second quarter, compared to $1.58 a share a year ago, in-line with Wall Street’s expectation of $2.4 a share. Revenue grew 48% to $22.19 billion, higher than the average consensus of $22.13 billion, according to Fiscal.ai. 

For the current quarter, Q3, AVGO forecast revenue of $29.4 billion, well below the upper end of the $25-$37.5 billion range expected by analysts, pushing stock prices lower. 

Most competitors in the semiconductor space have reported earnings that blew past expectations in the quarter gone by, with the street now expecting companies operating in the AI space to not only beat estimates but do so by a wider margin. 

“Q2 semiconductor revenue from AI of $10.8 billion grew 143% year-over-year, above our forecast, driven by increasing demand for custom AI accelerators and AI networking," said Hock Tan, President and CEO of Broadcom Inc. 

"The momentum continues and in Q3 we expect semiconductor revenue from AI to grow over 200 percent year-over-year to $16.0 billion," added Tan. 

AVGO Q3 Guidance 

Broadcom expects third-quarter revenue guidance of approximately $29.4 billion and non-GAAP operating income guidance of approximately 67% of projected revenue, and sees adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of approximately 68% of projected revenue.   

Broadcom shares soared about 42% in April and May, owing to the partnerships it signed with big tech companies, which are now looking to design their own silicon chips to power the massive AI tools and services they plan to develop.  

For instance, Anthropic, Meta and Alphabet (Google) have recently announced multi-billion dollar deals with Broadcom for custom semiconductors.   

AVGO Retail View 

Retail sentiment was “extremely bullish” with “extremely high” message volumes. 

One user dismissed the stock drop by saying shares have only returned to their April-May baseline. 

AVGO shares have soared nearly 39% year-to-date. 

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