Retail Dip Buyers Flock To Broadcom After Stock Drops Despite AI-Powered Q2 Beat

The company reported continued momentum in its artificial intelligence semiconductor solutions and VMware virtualization software unit.

Broadcom, Inc. (AVGO) shares fell over 4% in Thursday’s extended trading after the chipmaker issued a soft quarterly revenue forecast for the ongoing quarter, taking the spotlight off the better-than-expected second-quarter results. 

Retail traders were undeterred by the slide in shares and considered it a “buying opportunity.”

On Stockwits, retail sentiment toward Broadcom stock was ‘extremely bullish’ (98/100), with the message volume at ‘extremely high’ levels.

Calling the earnings report “good,” a bullish user said they expect the stock to hit $265 soon. 

Another attributed the after-hours drop to profit-taking, after the stock ran up in anticipation of a good report. “It had a great qtr which was no secret,” they said, adding “Buy the dip in a few days.”

The Palo Alto, California-based provider of semiconductor and infrastructure software solutions reported adjusted earnings per share (EPS) of $1.58 for the second quarter of the fiscal year 2025. This marked an increase from the year-ago’s $1.10 and beat the Finchat-compiled consensus of $1.57.

Revenue climbed 20% year over year (YoY) to a record $15 billion versus the $14.97-billion consensus estimate, with the topline growth slowing from the first quarter’s 25%. The company had guided for $14.9 billion in revenue for the quarter in early March.

Broadcom noted continued momentum in artificial intelligence (AI) semiconductor solutions and its VMware virtualization software unit. AI revenue jumped 46% YoY to $4.4 billion, thanks to robust demand for AI networking, but the growth slowed from the first quarter’s 77% pace. 

The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 67% was ahead of the 66% modeled by the company.

CFO Kirsten Spears said, "Free cash flow was a record $6.4 billion, up 44% year-over-year.”

Looking ahead, Broadcom projected third-quarter revenue of about $15.8 billion and an adjusted EBITDA margin of at least 66%. Analysts, on average, estimate revenue of $15.86 billion for the quarter.

Hock Tan, CEO of Broadcom, said, "We expect growth in AI semiconductor revenue to accelerate to $5.1 billion in Q3, delivering ten consecutive quarters of growth, as our hyperscale partners continue to invest."

Broadcom stock has gained 13% year-to-date.

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