Broadcom Q2 Earnings Show Record AI Growth Amid Selloff

Broadcom Inc. (Nasdaq: AVGO) reported record AI semiconductor revenue and raised multi-year free cash flow targets in its Q2 earnings on June 3, 2026. Despite these strong results, the stock experienced a sharp post-earnings selloff, prompting a valuation-reset narrative even as analysts maintain a Strong Buy consensus.

Record Q2 Results and Guidance

For the quarter ended May 3, 2026, Broadcom reported consolidated net revenue of $22.2 billion, up 48% year-over-year. AI semiconductor revenue surged 143% to $10.8 billion, exceeding forecasts. Adjusted EBITDA reached $15.2 billion, or 69% of revenue, while free cash flow was $10.3 billion, equal to 46% of revenue. GAAP net income was $9.3 billion, with GAAP diluted earnings per share (EPS) of $1.91. On a non-GAAP basis, net income was $12.1 billion and diluted EPS was $2.44. Management described the quarter as very strong, driven by AI semiconductors and operating leverage. CEO Hock Tan said, “Broadcom achieved record revenue, operating profit and free cash flow in Q2 driven by accelerating growth in AI semiconductor revenue and strong operating leverage.”

Semiconductor solutions revenue rose 79% year-over-year to about $15.0 billion. Infrastructure software revenue, supported by VMware as a core platform for cloud and AI workloads, increased 9% to $7.18 billion. Broadcom linked AI revenue growth to demand for custom AI accelerators and high-performance networking, tied to custom application-specific integrated circuits (ASICs) and networking solutions for hyperscale cloud customers.

For the third quarter ending August 2, 2026, Broadcom guided revenue to approximately $29.4 billion, an 84% increase year-over-year. It projected non-GAAP operating income at about 67% of revenue and adjusted EBITDA at roughly 68%. The company expects AI semiconductor revenue to rise to $16.0 billion. The filing also noted raised multi-year estimates for adjusted EBITDA and free cash flow for fiscal 2027–2028, emphasizing that AI demand remains very strong and exceeds near-term supply.

Selloff and Analyst Views

Following the earnings release and guidance, Broadcom’s stock experienced a sharp selloff amid a broader pullback in AI chip stocks. Sector commentary described a large-cap AI chip selloff that erased roughly $1.3 trillion in market value across semiconductor equities, intensifying pressure on Broadcom despite its strong fundamentals.

Analyst sentiment remains bullish. One aggregation shows 34 of 42 analysts rating Broadcom a Strong Buy, with an average price target near $507 and a high target of $640. Another sample lists 24 of 28 analysts at Buy with an average 12-month target near $510, ranging from $390 to $630. A further aggregator counts 44 of 48 analysts at Buy or Strong Buy, with average upside exceeding 25%. Commentary frames the post-earnings weakness as a valuation reset amid supply-constrained AI demand and sizable multi-year targets.

Reports also describe Broadcom’s planned partnership with Apollo Global Management and Blackstone’s credit and insurance businesses to launch an AI infrastructure financing platform backed by an initial $35 billion. This platform aims to fund data-center and hardware deployments, potentially scaling demand for Broadcom’s AI semiconductor and networking products.

The contrast between near-term valuation pressure and reiterated multi-year AI revenue and cash flow targets leaves investors weighing short-term volatility against analysts’ continued bullish outlook and substantial target-price upside.