Broadcom just posted one of the strongest quarters in its history. Revenue surged 86% year-over-year. Earnings crushed estimates. AI chip sales more than tripled. And the stock dropped.
The numbers that should have been a victory lap
Broadcom reported fiscal Q3 2026 revenue of approximately $29.6 billion, handily topping Wall Street’s consensus estimate of around $29.2 billion. That 86% year-over-year jump is the kind of growth rate most companies would frame and hang above the fireplace.
Adjusted earnings per share landed at $3.32, clearing analyst expectations of $3.22 to $3.24.
The real star of the show was AI semiconductor revenue, which hit $16.7 billion in the quarter. That figure represents a 221% increase compared to the same period last year and a 54% jump from the prior quarter.
The company pointed to surging demand for custom AI accelerators and networking solutions as the primary drivers. These are the chips that power hyperscaler data centers and the high-speed connections that link them together.
Where the mood shifted
Then came the guidance. Broadcom projected Q4 fiscal 2026 revenue of approximately $34.8 billion, representing roughly 93% growth year-over-year. But analyst expectations had crept up to around $35 billion, and the gap proved enough to sour the room.
Shares slid between 0.8% and 6% in after-hours trading, depending on the moment you checked.
Broadcom’s Q4 shortfall relative to estimates amounts to roughly $200 million on a $35 billion base. That’s less than 1% below consensus.
The longer view looks different
Broadcom raised its AI semiconductor revenue outlook to approximately $115 billion for fiscal year 2027, up from a previous estimate of over $100 billion. The company also laid out a target of roughly $230 billion for FY2028.
Hyperscalers like Microsoft, Google, Amazon, and Meta have collectively committed hundreds of billions to data center expansion. Custom AI accelerators, where Broadcom has carved out a strong niche designing chips tailored to specific cloud providers, are becoming increasingly central to these buildouts.
What the selloff signals
The after-hours decline extends what has been a frustrating stretch for Broadcom shareholders relative to the broader chip sector. Despite posting growth rates that would make most tech CEOs weep with joy, the stock has underperformed peers.
The competitive landscape adds pressure. Marvell Technology is pushing aggressively into custom AI silicon, competing directly with Broadcom for hyperscaler contracts. Nvidia continues to dominate the GPU market while expanding into networking.
Analysts will likely spend the coming days adjusting their models and price targets, with the $200 million guidance miss competing for attention against the $15 billion upward revision to the FY2027 AI outlook.