Broadcom's AI Revenue Machine Hits a Speed Bump as Margins Tighten and Valuation Gets Scrutinized
Veröffentlicht: 07.07.2026 um 18:25 Uhr, Redaktion boerse-global.de
For all the euphoria surrounding Broadcom's extended chip partnership with Apple, the market has not been shy about carving out a more cautious view. The custom-chip supply agreement, now locked in through 2031, removes a significant chunk of customer-concentration risk from the table — but it has done little to arrest the stock's slide from its June highs or blunt the growing unease over profitability trends.
Shares in the semiconductor and infrastructure software giant have shed more than 7% over the past 30 days and sit nearly 26% below the 52-week peak of $495 set on June 3. That sell-off accelerated after a brief rally on July 6, when the stock opened at $373.61 and hit an intraday high of $383.16, buoyed by both the Apple news and a broader sector-wide bounce. The recovery proved short-lived, and by the following session the stock had given back most of those gains, trading in the €318.70 range on European exchanges.
Revenue Is Exploding, but Margins Are Shrinking
The disconnect between operating performance and market reception is stark. Broadcom's second fiscal quarter of 2026 delivered revenue of just over $22 billion, propelled by a 143% surge in AI semiconductor sales. Management has lifted its full-year AI revenue forecast to $56 billion and expects that figure to surpass $100 billion in the fiscal year ahead. A $30 billion backlog of orders suggests demand is not ebbing.
Yet the business is becoming less profitable at the gross margin line. For the third quarter, management guided for a gross margin of 74%, down from more than 77% in the prior period. The culprit is the product mix: lower-margin, custom AI chips are taking a larger share of total sales, compressing overall profitability. Investors who had been expecting even loftier numbers after the record order book were disappointed.
Should investors sell immediately? Or is it worth buying Broadcom?
A $1.7 Trillion Market Cap Under the Microscope
Broadcom currently trades at roughly 60 times trailing earnings — a multiple that implies a free cash flow of about $115 billion by 2028. That requires extremely aggressive revenue assumptions, according to market watchers. A more realistic estimate, factoring in potential revenue losses from key clients, puts that figure closer to $80 billion.
Customer concentration is a growing concern. While Apple has now extended its relationship through 2031, reducing the risk from that single account, the dependence on other hyperscalers remains a vulnerability. If Google, for example, were to reduce its procurement of custom processors, Broadcom could lose as much as $25 billion in revenue by 2028, according to one estimate. While $80 billion in free cash flow would still be exceptional by most standards, it would not justify a $1.7 trillion valuation in the eyes of many analysts.
The technical picture reflects this uncertainty. The stock trades about 9% below its 50-day moving average, a level that often signals near-term weakness. The 200-day moving average, sitting near €312, is providing a support floor; a break below that line would likely trigger further selling.
Rivals, Insiders, and the Next Earnings Catalyst
The market's attention is increasingly turning to the competitive landscape. Broadcom's principal rival in custom AI silicon, Marvell Technology, has outperformed the stock in recent months despite showing lower earnings growth. A prominent investor on TipRanks recently downgraded Marvell to "Hold" while maintaining a "Buy" rating on Broadcom, arguing that the sell-off in Broadcom's shares has largely run its course and that the growth story is only in its early innings. Marvell's price-to-earnings multiples — both trailing and forward — are notably higher than Broadcom's, even though Broadcom is delivering faster profit expansion.
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Insider activity continues to cloud the narrative. In the weeks following the last earnings report, several senior executives and a director sold meaningful blocks of shares, including the company's Chief Legal and Corporate Affairs Officer. Such moves have traditionally been viewed with suspicion, though they can also reflect portfolio rebalancing.
The next major catalyst will be Broadcom's third-quarter results, typically due about three months after the June quarter. Management has already flagged a jump in AI semiconductor revenue for that period, but whether that translates into a sustained recovery for the stock — or remains a speed bump in a volatile ride — will depend on how the margin story evolves. Until concrete data on that front emerges, the tug-of-war between record revenue growth and eroding profitability is likely to keep the stock swinging.
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