Anthony Lee
3 min read
What Happened?
Shares of fabless chip and software maker Broadcom (NASDAQ:AVGO) fell 3.9% in the afternoon session after its competitor Marvell Technology landed a deal to develop custom artificial intelligence (AI) chips for Google.
The agreement, released in a joint company statement between Marvell and Alphabet’s Google, raised investor concerns about Broadcom’s future market share with one of its most important AI customers. The deal could pressure Broadcom’s role as the incumbent custom silicon partner for Google’s Tensor Processing Unit ecosystem. TradingKey reported that the announcement created anxieties regarding long-term market share retention.
The shares were trading at $364.52, down 4.1% from the previous close.
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What Is The Market Telling Us
Broadcom’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 14.3% on the news that the company reported underwhelming Q2 FY2026 results: the problem was the specific figure that drives Broadcom’s valuation multiple, and management’s choice not to raise its long-term target.
Broadcom guided Q3 AI semiconductor revenue to $16 billion, a number representing more than 200% year-over-year growth, but approximately $1.2 billion below what analysts had modelled.
CEO Hock Tan then reiterated, rather than raised, the company’s FY2027 AI semiconductor revenue target of “in excess of $100 billion.” At 25-30x forward revenue, the market needed more than confirmation, it needed acceleration.The underlying results were genuinely exceptional. Q2 revenue reached a record $22.19 billion, up 48% year-over-year, with AI semiconductor revenue surging 143% to $10.8 billion, slightly ahead of Broadcom’s own $10.7 billion prior guidance. Non-GAAP EPS of $2.44 beat the $2.40 consensus. Free cash flow hit a record $10.3 billion, representing 46% of revenue. EBITDA margin reached a record 69%. Q3 revenue guidance of $29.4 billion beat the $28.53 billion consensus, implying 84% year-over-year growth. Tan confirmed six hyperscaler customers including Anthropic, Google, Meta and OpenAI, and announced an AI compute platform with Apollo and Blackstone targeting 20 gigawatts of capacity by 2028.
