Broadcom Tripled AI Chip Revenue and Wall Street Sold the Stock Anyway

Broadcom gave investors exactly the kind of AI growth story they usually reward. The stock still fell, because at this price Wall Street wants no doubts at all - strong results alone won't cut it.

Broadcom reported record revenue of $29.6 billion for its fiscal third quarter on September 2, up 86% from a year earlier, with AI semiconductor revenue more than tripling to $16.7 billion. Adjusted earnings came in at $3.32 a share. By any normal measure, this was a huge quarter. Shares fell anyway.

That is the story. Not weak demand. Not a broken AI cycle. Broadcom's own release said the quarter ended August 2 produced $13.7 billion of free cash flow after capital spending, and CEO Hock Tan said AI semiconductor revenue grew 221% from a year earlier and 54% from the prior quarter. Investors still marked the stock down after the report, with MarketWatch putting the post-earnings drop at 5.3%.

Tan gave Wall Street a larger number to chew on, too. On the earnings call, according to the company transcript published by Fortune, he said Broadcom had secured supply to double AI semiconductor revenue to about $115 billion in fiscal 2027 and had line of sight to double it again to $230 billion in fiscal 2028. That would put Broadcom deep inside the small group of companies supplying the physical guts of the AI boom.

Fourth-quarter guidance called for revenue of about $34.8 billion. That's not a bad forecast. It just wasn't clean enough.

The beat was too small for the price

The problem is that Broadcom isn't being priced like a normal chip company. Benzinga's earnings data put fiscal third-quarter revenue at $29.59 billion against an estimate of $29.44 billion, a revenue surprise of just 0.51%. Adjusted earnings beat. But only after investors had already spent months paying up for the AI story. When a stock has carried that much expectation, a narrow beat can feel like a miss.

Investopedia reported that Broadcom's $34.8 billion fourth-quarter outlook was short of analysts' $35.4 billion expectation and pushed the stock into negative territory for the year. That is the part investors should notice. The business is still expanding at a pace most companies would envy, yet the shares have stopped behaving as if growth alone is enough.

Valuation makes that reaction harsher. StockAnalysis data showed Broadcom trading at a current price-to-earnings ratio above 45 after the quarter, with a forward multiple around 21. Those numbers are lower than the most overheated parts of the AI market, but they still leave little room for disappointment. You don't get rewarded for being excellent when investors already paid for perfect.

Google is the question Wall Street won't drop

Then there's Google. Broadcom's custom AI chip business, including Google's Tensor Processing Units, has been a central piece of the company's AI surge. In April, Broadcom said in an SEC filing that it had signed a long-term agreement with Google to develop and supply future TPU generations and provide networking and other components for Google's next-generation AI racks through up to 2031. Reuters reported the same agreement at the time, along with a related Anthropic capacity arrangement starting in 2027.

That should have calmed investors. It didn't.

In August, Marvell announced a Google custom silicon agreement that included warrants allowing Google to buy as much as $12.2 billion of Marvell stock if purchasing targets are met. Invezz reported that Broadcom shares fell about 5% at the open after that news, while Marvell rose about 7%. The message was plain enough: Google may still need Broadcom, but it doesn't want to depend on one supplier forever.

Macquarie's view sharpened that worry. Yahoo Finance reported in June that the firm expected Broadcom's share of Google's TPU-related revenue to fall from roughly 95% in 2026 to 80% in 2027 and 65% in 2028, as MediaTek gains a larger role and Google advances its own chip strategy. That forecast may prove too harsh. But frankly, it is exactly the kind of risk investors start to care about once the easy AI multiple expansion has already happened.

Broadcom is not suddenly in trouble. A $16.7 billion AI semiconductor quarter, followed by guidance for $21.7 billion in the current quarter, is still one of the strongest semiconductor growth stories in the market. The company also has more than Google in the mix, with customers and partners across the hyperscaler and AI lab world, including Anthropic and OpenAI.

The stock drop says something narrower and more useful. Investors believe AI demand is real. They also believe the biggest buyers now have enough scale to spread orders across Broadcom, Marvell, MediaTek, internal chip teams, and whoever else can get the job done. That changes the trade. Broadcom can keep growing fast and still face harder questions about who captures the profit.

Tan can point to $230 billion in 2028 AI semiconductor revenue. Wall Street will keep asking how much of that future belongs to Broadcom, and how much customers like Google intend to take back for themselves.

Also read: Nike Drops Out of the S&P 100 After Losing $230 Billion in Value • Microsoft finds an AI jailbreak trick fueling a 2.37 million email phishing wave • Four AI Labs Released Major Models in One Week and Buyers Can't Keep Up