It was a 'messy start' to the second quarter FY2026 earnings call for Broadcom. The reason: CEO Hock Tan began his earnings call by reading last year's numbers off a piece of paper. 'Well, in Q2, revenue was a record $15 billion as we grew 79% year-on-year. Driving this growth was AI semiconductor revenue at a record $10.8 billion, up 143% — well, let me restart, guys,' Tan said to begin the call. He went on to correct himself, saying, 'Thank you, Ji. Thank you, everyone, for joining today. In our fiscal Q2 2026, total revenue reached a record $22.2 billion, up 48% year-on-year, above our guidance on strength in AI semiconductors.'
Broadcom reported revenue of $22.19 billion, slightly exceeding the consensus estimate of $22.13 billion. However, the numbers reportedly fell short of whisper numbers on Wall Street. Earnings per share came in at $2.44, topping estimates of $2.39. Notably, Tan did not raise the company's guidance. Broadcom's CEO maintained the forecast for AI semiconductor sales in 2026, stating that Broadcom will sell $56 billion in AI chips in the fiscal year ending in October. This forecast fell short of the average estimate of $57.6 billion. '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. AI chip sales guidance for the next quarter came in at $16 billion, below the $17.2 billion Wall Street had expected.
Market Reaction: Black Thursday for Broadcom
With over $300 billion wiped out in a few hours, it became Black Thursday for Broadcom. Shares of Broadcom fell 15% in premarket trading, on track to erase about $300 billion in market cap. The rout continued later in the day, wiping billions from Broadcom's market capitalization. Although the company is making headway in pivoting to AI customers, it faces outsized investor expectations, which reportedly hurt its stock. Broadcom had added roughly $270 billion in market value over the last five trading sessions before the earnings report, fueled by AI optimism.
Long-Term Deals and Revenue Recognition
Broadcom has signed and expanded long-term deals with companies like Google, Anthropic, and Meta, but questions remain about how much revenue will be recognized in each quarter—as opposed to being accounted for in a multiyear backlog. Total revenue in the period ending in July will be about $29.4 billion, Broadcom said. While analysts estimated $28.6 billion on average, some projections ranged billions of dollars higher.
Some analysts called the fall in Broadcom stock a reminder to everyone of how high expectations matter. This looks more like a sentiment reset than a fundamental problem, as the company reported nearly 50% revenue growth, 88% earnings growth, and accelerating AI revenue.
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