Broadcom’s stock fell as margin compression overshadowed 143% AI revenue growth and $30 billion in AI bookings.
Broadcom Inc. (NASDAQ:AVGO) shares declined nearly 10% over the past month despite reporting a 143% year-over-year increase in AI revenue and AI bookings exceeding $30 billion. The stock dropped after earnings as investors reacted to a 310 basis point gross margin compression to 74%, contrary to prior guidance of stable margins.
The company had surged over 60% ahead of earnings, with markets pricing in an upgraded outlook. Instead, Broadcom reaffirmed existing targets, including Q3 AI revenue growth of over 200% year over year. Analysts cited unmet expectations, though shipments lagged bookings at $10.8 billion.
Margin pressure stemmed from a shift toward lower-margin hardware, raising concerns about future profitability as the ASIC business scales. Bears warn of further compression, particularly with Google as Broadcom’s largest customer.