This article first appeared on GuruFocus.
Broadcom Inc. (NASDAQ:AVGO) fell 12.85% in premarket trading after reporting Q2 FY2026 non-GAAP EPS of $2.44, beating the $2.40 consensus, on revenue of $22.187 billion, up 48% year-over-year and ahead of the $22.130 billion estimate. AI semiconductor revenue hit a record $10.8 billion, up 143% year-over-year. Adjusted EBITDA reached $15.244 billion, a 69% margin, and free cash flow came in at $10.262 billion, a 46% margin.
Two things weighed on the stock. Infrastructure software came in at $7.18 billion, up 9% year-over-year but short of the $7.32 billion analysts expected. More significantly, CEO Hock Tan did not raise Broadcom’s full-year AI chip revenue target, reiterating guidance of “in excess of $100 billion.” Tan said six core custom chip customers, including Anthropic, Google (NASDAQ:GOOG), Meta (NASDAQ:META), and OpenAI, are driving AI revenue growth, and that Q3 AI revenue is expected to reach $16 billion.
Q3 FY2026 revenue guidance came in at approximately $29.4 billion, up 84% year-over-year, with non-GAAP operating margin of approximately 67% and adjusted EBITDA of approximately 68% of revenue. The guide beat estimates, but leaving the $100 billion AI chip target untouched may have left some investors wanting more.
