Broadcom (AVGO) Stock Drops 13% After Earnings — Is This a Buying Opportunity?

TLDR

• Broadcom stock closed down 12.6% Thursday, wiping out $280 billion in market cap — one of the largest single-day losses in megacap history.
• Q2 revenue hit a record $22.19 billion, up 48% year-over-year, and non-GAAP EPS of $2.44 beat estimates, but the AI guidance missed.
• Q3 AI semiconductor revenue was guided to $16 billion — over 200% year-over-year growth, but roughly $1.2 billion below analyst expectations.
• CEO Hock Tan reiterated, rather than raised, the FY2027 AI revenue target of “in excess of $100 billion,” which wasn’t enough for a stock that had rallied over 40% into earnings.
• Historically, Broadcom has recovered strongly after big drops — rising nearly 80% of the time one month after a 6%+ decline, and higher one year later in all but one instance since 2009.

Broadcom (AVGO) posted record results on nearly every financial metric this quarter. Somehow, that still wasn’t enough.

Broadcom Inc., AVGO

The stock closed down 12.6% on Thursday at $408.92, erasing around $280 billion in market value in a single session. That ranks it among the largest one-day megacap losses in recent US market history, trailing only Nvidia and Microsoft for single-stock wipeouts since 2019.

The trigger wasn’t bad results — it was a guidance miss on the one number that matters most to investors right now: AI chip revenue.

Q2 revenue came in at a record $22.19 billion, up 48% year-over-year. AI semiconductor revenue surged 143% to $10.8 billion. Non-GAAP EPS of $2.44 beat the $2.40 consensus. Free cash flow hit a record $10.3 billion — 46% of revenue. EBITDA margins reached a record 69%. These aren’t the numbers of a company in trouble.

Where the Miss Came In

For Q3, Broadcom guided AI semiconductor revenue to $16 billion. That represents more than 200% year-over-year growth. But analysts had modelled roughly $17.2 billion, leaving a gap of about $1.2 billion.

AVGO had rallied more than 40% in the weeks heading into earnings. When expectations are that stretched, even record-breaking results can disappoint.

Tan confirmed six hyperscaler customers including Anthropic, Google, Meta, and OpenAI. He also announced a new AI compute platform with Apollo and Blackstone targeting 20 gigawatts of capacity by 2028. It wasn’t enough to move the needle.

Most analysts kept constructive views after the decline. Jefferies raised its price target to $550. Wells Fargo maintained $545. Macquarie was the outlier, downgrading to Neutral. The dominant view on Wall Street: this was a “catalyst gap, not an AI demand collapse.”

What History Suggests

Broadcom has been here before — sort of. Since 2009, the stock has had 39 one-day drops of 6% or more. It was higher one month later nearly 80% of the time, higher three months later nearly 90% of the time, and higher one year later in all but one case.

Median returns after those drops were also strong: approximately 8% after one month, 20% after three months, and 61% after one year.

That said, history doesn’t guarantee anything. The key signal to watch is whether buyers step in after the initial shock — not assume they will on day one.

At $408.92, AVGO is now trading 15.1% below its 52-week high of $481.57. The stock is still up 17.6% year-to-date.

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