Broadcom Falls 15% After Record AI Quarter on Margin Concerns

Broadcom shares dropped about 15% after the company reported second-quarter revenue of $22.2 billion and $10.8 billion in AI semiconductor sales. Total revenue rose 48% year over year and AI semiconductor sales increased 143% from a year earlier.

Bookings topped $30 billion while shipments were $10.8 billion, creating a backlog that extends demand visibility into 2028. Semiconductor Solutions revenue was $15.009 billion. Infrastructure software revenue totaled $7.2 billion and annual recurring revenue increased 17%.

Management guided third-quarter revenue to about $29.4 billion, projected full-year 2026 AI revenue near $56 billion and reiterated a target of more than $100 billion for 2027.

Reported gross margin declined to 77.1%, down about 230 basis points from a year earlier, and the company forecast a margin near 74% for the next quarter. Company commentary attributed the margin decline to a higher share of custom AI chips, which carry lower margins than legacy chips and software.

Adjusted earnings per share rose to $2.44, while GAAP EPS has varied across recent quarters because of acquisition-related charges and other one-time items. The diluted share count increased from about 4.63 billion to 4.74 billion over the period.

Institutional money-flow measures and options-market indicators showed reduced buying pressure ahead of the release. A commonly used money-flow metric fell from about 0.5 in early May to roughly 0.11. The put-call open interest ratio was about 1.12 before the report and eased to roughly 1.09 after; the volume put-call ratio increased.

Tracking of crypto perpetual contracts showed the smart-money cohort net short about $1.06 million. Larger whale wallets held about $4.0 million in Broadcom exposure, split roughly $2.63 million short versus $1.36 million long, a net short position near $1.27 million. One large trader held about $1.69 million long in the S&P 500 and $1.42 million long in Nvidia, but only about $25,000 long in Broadcom.

Analysts raised forward price targets after the results, with at least one lifting its target to $650 from $550 while others maintained bullish ratings. Broadcom shares have gained about 38% year to date and roughly 70% since late March. Shares fell about 15% in U.S. trading following the report.