Here's why Broadcom stock fell 4% after rising due to better-than-expected earnings

Artificial intelligence chipmaker Broadcom stock slipped 4% after market hours on 11 December amid concerns over its AI product order backlog, narrower profit margins, and no revenue forecast for 2026, Bloomberg reported.

Broadcom Inc. Is competing against Nvidia for a share of the AI chips market, and earlier in the day rose due to earnings beating investor expectations.

Why is the Broadcom stock down?

Broadcom's shares slipped close to 4% on 11 December, despite rising earlier in the day, after investors were “unsettled” by CEO Hock Tan's answers during the analyst call, as per the report.

Investors concerned over AI product backlog

As per Tan, the chipmaker has a “minimum” of $73 billion worth of AI product orders in backlog, that are lined up to be shipped over the next six quarters. He clarified, “We do expect much more as more orders come in for shipments within that next six quarters. So, our lead time, depending on the particular product it is, can be anywhere from six months to a year.”

But the number and timeline disappointed some investors, the report added.

Narrower profit margins, no forecast for 2026

Further informing that the company has a $11 billion order from Claude AI maker and OpenAI rival Anthropic PBC in Q4, Tan also warned that the company's total profit margins would narrow due to AI product sales.

The company also did not share a revenue forecast for 2026, causing jitters and expanding disappointment. Tan sought to explain it as a “moving target”, and said, “It’s hard for me to pinpoint what ’26 is going to look like precisely. So, I’d rather not give you guys any guidance.”

Broadcom earnings beat analysts' estimates

• The earnings earlier the same day was generally upbeat, with the company announcing sales close to $19.1 billion in the fiscal first quarter, which ends February 1, the company said.
• Analysts had estimated $18.5 billion on average, according to data compiled by Bloomberg. The company also boosted its quarterly dividend 10% to 65 cents a share.
• Broadcom shares had soared this year, with investors betting that the company will be a key beneficiary of AI spending. Against that backdrop, the company struggled to satisfy expectations.
• The $11 billion Anthropic order in the fourth quarter followed a $10 billion deal in the third, he said. Broadcom also signed another customer order worth $1 billion, Tan said, without identifying the client.
• Broadcom has benefited from demand for its custom chips as part of a massive data center build-out, giving it a growing piece of an industry dominated by Nvidia.
• Tan said that AI semiconductor revenue would double to $8.2 billion in the first quarter compared with a year earlier.

About Broadcom

Much of the recent buzz around Broadcom stems from its ties to some of the biggest AI model providers. ChatGPT maker OpenAI signed a pact with Broadcom for its own AI chip designs. In another transaction, Anthropic agreed to use tens of billions of dollars’ worth of computing services based on Alphabet Inc.’s Google Cloud TPUs. The latter components also rely on Broadcom designs, helping fuel investor enthusiasm about the chipmaker’s AI prospects.

Broadcom shares had earlier closed at $406.37 in New York, leaving them up 75% this year.

The Palo Alto, California-based company has a wide-ranging lineup that spans communications chips, networking components and software.

As part of its bid to generate greater revenue from AI, Broadcom has been updating its networking equipment to move data more quickly inside and between data centers. With AI models getting more complex, the ability to connect chips, racks of servers and whole buildings is growing more critical.

In the fiscal fourth quarter, which ended Nov. 2, Broadcom posted sales of $18 billion. Earnings rose to $1.95 a share, excluding some items. Analysts had estimated revenue of $17.5 billion and profit of $1.87 a share.

As part of Broadcom’s OpenAI deal, announced in October, the ChatGPT maker will use custom chips and networking components to help power its artificial intelligence services.

The deal will bring in additional revenue to Broadcom’s custom chip unit and provide deeper access to the booming AI market. Though the company has already seen its revenue from artificial intelligence computing climb, Broadcom has remained in the shadow of Nvidia, the top seller of AI processors.

Tan, the CEO, stands to benefit handsomely if that business meets long-term financial goals. The executive is due to get 610,521 shares of Broadcom if AI revenue hits $90 billion by fiscal 2030. If the sales reach $120 billion, Tan is poised for 300% of the payout.

(With inputs from Bloomberg)