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Broadcom shares fell after the company issued fourth-quarter guidance that trailed Wall Street’s target. The Broadcom revenue forecast miss overshadowed a blowout third quarter built on soaring AI chip sales. Broadcom told investors to expect roughly $34.8 billion in fiscal fourth-quarter revenue. Analysts polled by LSEG had expected about $35.03 billion, according to Reuters. The gap is small in percentage terms. But it landed on a stock priced for perfection, and traders sold first and asked questions later.
The Broadcom revenue forecast miss, by the numbers
Broadcom’s own numbers tell two different stories. The third quarter, reported on September 2, was excellent. Revenue hit $29.6 billion, up 86% from a year earlier, according to the company’s investor relations release. Non-GAAP operating income reached $20.1 billion, a 92% jump. Free cash flow came in at $13.7 billion, or 46% of revenue.
The trouble sits in the outlook. Broadcom guided fourth-quarter revenue to about $34.8 billion. That still marks 93% growth from a year earlier. Yet it fell short of the $35.03 billion consensus tracked by LSEG. Bloomberg’s own survey put the average estimate near $35.1 billion, with some analysts modeling above $36 billion. Broadcom also guided non-GAAP operating margin to about 66% of revenue for the quarter, flat against the year-ago period. Wall Street had penciled in further margin expansion, not a plateau.
What Hock Tan and Amie Thuener Told Investors
Broadcom CEO Hock Tan pointed to a specific growth engine. “Demand for our custom AI accelerators and networking continues to be very strong,” Tan said in the earnings release. He noted that AI semiconductor revenue reached $16.7 billion in the third quarter, up 221% year-over-year and 54% from the prior quarter. Tan told investors that momentum would continue. He guided AI semiconductor revenue to climb to $21.7 billion in the fourth quarter, a 236% annual increase.
CFO Amie Thuener echoed that confidence while acknowledging the flat margin outlook. “We delivered non-GAAP operating income growth of 92% year-over-year, as consolidated revenue grew 86% year-over-year to $29.6 billion,” Thuener said. She added that fourth-quarter revenue growth is forecast at 93% year-over-year, with the non-GAAP operating margin held at 66%, flat from a year ago. Investors read that as a signal. Heavy investment, not weakening demand, is compressing near-term profitability.
AI Chip Demand Is Soaring — So Why the Forecast Gap?
Broadcom’s custom AI chip business, often called XPUs, has become central to its growth story. The company designs application-specific processors for hyperscale customers, including Alphabet’s Google. Google’s tensor processing units, built with Broadcom, sit at the center of that partnership. Broadcom has also helped arrange financing so Anthropic can buy the computing power its custom chips help produce. That build-out sits inside a wider debate over chip export bills touching Anthropic and the industry group ITI. Export strength elsewhere reinforces the point. South Korea’s chip exports hit a record in the same stretch, a sign that global AI infrastructure spending has not slowed.
Competition is the other half of the story. Rival Nvidia delivered a strong forecast of its own the week before Broadcom reported. Bloomberg Intelligence analysts said Nvidia had set a high sales bar for the rest of the sector. Marvell Technology and MediaTek are both racing to win custom chip work, and both count Nvidia as a backer. Marvell announced a deal last month to help build custom semiconductors for Google, a customer Broadcom has long served. That competitive pressure, more than any drop-off in AI demand, appears to explain the cautious guidance.
How Wall Street Reacted to the Forecast Miss
Broadcom shares dropped about 4% in after-hours trading once the numbers landed, according to Bloomberg. The stock had climbed roughly 6% for the year heading into the report, leaving little room for disappointment. Some analysts pushed back on the sell-off. Bernstein’s Stacy Rasgon said the underlying quarter was strong. He called the results very, very good and noted that semiconductor revenue actually landed slightly above expectations. Other analysts framed the move as a reset in expectations after a run of AI-driven gains, rather than a sign of fading demand.
What Comes Next for Broadcom’s AI Chip Business
Broadcom’s own guidance points to continued expansion, not contraction. Management has said it expects AI-related revenue to keep growing sharply into fiscal 2027 and 2028, based on commitments already on the books. Broadcom is not alone in wiring multi-year AI compute commitments into today’s numbers. OpenAI has been in its own funding talks tied to a rising valuation, and its backers are locking in the same kind of long-term computing bets Broadcom is chasing with Anthropic. The financing arrangements with Apollo Global Management and Blackstone still need to close and fund actual chip purchases, a process that will take years to play out. Investors will also watch whether new custom chip customers emerge beyond Google, and whether Broadcom can defend its lead against Marvell and MediaTek. The next real test comes when Broadcom reports fourth-quarter results in December. The market will then see whether $34.8 billion in revenue landed, or beat it.
Frequently Asked Questions
What is the Broadcom revenue forecast miss?
The Broadcom revenue forecast miss refers to the company’s fourth-quarter guidance of about $34.8 billion, below the $35.03 billion analysts expected, according to LSEG data cited by Reuters.
Why did Broadcom stock fall after strong earnings?
Shares fell because the fourth-quarter outlook missed consensus estimates, even though third-quarter revenue grew 86% and beat expectations. Investors focused on the forward guidance rather than the results already reported.
How much did Broadcom’s AI chip revenue grow?
Broadcom’s AI semiconductor revenue reached $16.7 billion in the third quarter, up 221% from a year earlier. The company guided AI semiconductor revenue to $21.7 billion for the fourth quarter.
What operating margin did Broadcom guide for the fourth quarter?
Broadcom guided non-GAAP operating margin to approximately 66% of revenue for the fourth quarter, flat compared with the year-ago period.
Is competition affecting Broadcom’s custom chip business?
Yes. Marvell Technology and MediaTek are both pursuing custom AI chip deals, and Nvidia’s own strong forecast the week before Broadcom’s report raised expectations across the sector.
Does the forecast miss mean AI chip demand is slowing?
Not according to Broadcom’s own numbers. Guidance still calls for 93% year-over-year revenue growth in the fourth quarter. Analysts including Bernstein’s Stacy Rasgon described the underlying business as strong.
Sources
- Reuters — Broadcom forecasts quarterly revenue below estimates. https://www.investing.com/news/stock-market-news/broadcom-forecasts-quarterly-revenue-below-estimates-4886736
- Broadcom Inc. — Third Quarter Fiscal Year 2026 Financial Results. https://investors.broadcom.com/news-releases/news-release-details/broadcom-inc-announces-third-quarter-fiscal-year-2026-financial
- Bloomberg via Yahoo Finance — Broadcom Forecast Misses Estimates, Disappointing Investors. https://finance.yahoo.com/markets/stocks/articles/broadcom-forecast-misses-estimates-disappointing-201959798.html
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