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Broadcom stock dropped by 4.1% on March 13, 2026, to close near $322.16. The decline followed a record fiscal first-quarter 2026 result from the company that surpassed the Wall Street expectations.
In the quarter, Broadcom recorded revenue of $19.31 billion, a 29% growth over the year. AI semiconductor revenue at the company more than doubled compared to last year, reaching $8.4 billion and accounting for 44% of overall sales.
Despite the robust performance, Broadcom stock experienced a sell-off, and the trading volume was roughly 29% above average. The fall came after an earnings call by the company in which the CEO Hock Tan had predicted that the revenue of AI chips would grow significantly, with projections indicating that it may grow to over $100 billion by 2027.
The future projections of the company towards the second quarter were also promising as it predicted that the company would have a revenue of $22 billion and AI semiconductor revenue of $10.7 billion.
The decline in Broadcom's stock price can be attributed to several factors, despite the strong earnings report. Underperformance of the company's infrastructure software segment, which contributed $6.8 billion in revenue, was one of the main factors.
This figure fell roughly $190 million lower than the analysts' estimates, which affected the sentiment. Moreover, the Broadcom software revenue guidance of $7.2 billion in the next quarter was also 1.7% lower than expected, adding to the questions on whether the company would achieve its long-term goals in this segment.
Also, Broadcom's gross margins reduced to 77% in the quarter, in part, because of the growing proportion of lower-margin sales of custom AI accelerators. The company raised this trend in late 2025.
Although AI remains a strong growth driver, the shift toward custom chips with thinner margins raised questions about the company's ability to maintain profitability in the face of rising sales in this category. The valuation of the company might also have contributed to the fall of the stock, since Broadcom is now trading at a price-to-earnings ratio of approximately 65, indicating that its growth potential is already priced into the stock.
Broadcom is still working on its long-term AI infrastructure growth. The company is establishing itself as a major player in the fast-emerging market of AI, especially through its investments in AI chip manufacturing as well as data center networking solutions.
At the California Optical Fiber Communications Conference in Los Angeles, Broadcom announced new AI networking technologies, such as its Taurus 400G optical digital signal processor and modular XPU platform. The innovations are aimed at supporting the creation of next-generation, gigawatt-scale AI clusters and enhancing performance in high-bandwidth computing environments.
The rise in demand for faster communication in hyperscale AI clusters is addressed by the launch of novel 400G per lane optical processors, electro-absorption modulated lasers, and photodiodes by the company.
The Thor Ultra 800G network interface card introduced by Broadcom is also set to increase ultra-high bandwidth data transfer within large data center settings. The innovations have also solidified the mission of Broadcom in AI infrastructure, which addresses the increased demand for high-performance networking in sophisticated AI applications.
Also Read: OpenAI Partners with Broadcom in Multibillion-Dollar Chip Deal to Power Next-Gen AI Revolution
The optimistic future expectations of Broadcom have been retained, and its AI business is expected to be robust. The expanding AI semiconductor sales of the company and the increasing infrastructure portfolio make Broadcom a promising future competitor in the fast-changing market.
But the investors have been wary of the existing premium in the stock and the risks associated with the software segment performance. The insider selling of Broadcom, especially by CEO Hock Tan and CFO Kirsten Spears, has been questioned, too.
However, analysts are overall optimistic, with Morgan Stanley rating the company as Overweight, carrying a price target of $435, which indicates that the company has upside potential. Nevertheless, its ability to sustain its leadership in the market will depend on how the company manages the margin pressures and leverages its AI opportunities.
