Why Broadcom's Best Quarter Ever Wasn't Enough for Wall Street?

Broadcom reported its fiscal second quarter 2026 results after the close on June 3, posting $22.187 billion in total revenue, a 48% increase year over year that beat its own guidance. The headline number from a market perspective, however, was AI semiconductor revenue, which reached a record $10.8 billion for the quarter, up 143% from the same period a year earlier. Free cash flow came in at $10.262 billion, representing 46% of total revenue, a margin profile that few companies at this revenue scale have ever achieved. CEO Hock Tan stated he expects AI revenue to triple in the current quarter to approximately $16 billion.

Despite the extraordinary performance, Broadcom shares fell 13% following the earnings release, a reaction that baffled some investors but that analysts attributed to two factors: Tan's decision not to raise the company's full year AI semiconductor guidance, maintaining his forecast for AI revenue to exceed $100 billion across fiscal 2027 rather than updating his current year forecast, and his announcement that Broadcom will now offer its customers "chips only" rather than the complete integrated AI systems the company had previously planned to provide. Both decisions suggest Tan is managing supply chain and delivery timing carefully rather than overselling near term deliverability.

The Broadcom results arrive alongside broader data on Big Tech AI capital expenditures, which topped $650 billion in Q1 2026 across the major hyperscalers. Microsoft reported AI business revenue running at a $37 billion annualized rate, up 123% year over year, as of its Q3 fiscal results. Amazon reported net sales of $181.5 billion for Q1, up 17%, and guided strongly for the current quarter. Meta, which raised its 2026 capital expenditure guidance to between $110 billion and $125 billion, dropped 6% despite strong earnings as investors worried about the cost trajectory of its AI ambitions. Alphabet was the lone mega cap gainer on the day, lifted by cloud strength and strong AI adoption metrics.