Investors sold off AVGO after Q2 FY26 results, citing unchanged AI revenue guidance despite earnings exceeding expectations.
Broadcom (AVGO) shares plunged nearly 14% this week as Wall Street reacted negatively to the company’s Q2 FY26 update, despite beating Street forecasts for both quarterly earnings and full-year outlook. The selloff was driven by unchanged AI chip revenue guidance and a softer-than-expected AI revenue outlook, disappointing investors anticipating stronger updates.
Analysts had expected more aggressive growth projections, particularly in AI infrastructure, where Broadcom remains a key player. Prior quarters had shown robust performance, but the latest guidance failed to reflect accelerating demand, raising concerns about hyperscale capital expenditure returns and competitive pressures.
Some analysts view the decline as overdone, pointing to strong earnings growth, a solid AI infrastructure pipeline, and attractive valuation. However, risks include margin pressures, working capital challenges, and a stock valuation reliant on sustained AI outperformance.