Broadcom’s selloff looks backward. The market punished AVGO for failing to clear an absurdly high bar, even though the company just reported Q2 revenue of $22.2 billion, up 48% year over year, and AI semiconductor revenue of $10.8 billion, up 143%. The key number is the next one: management guided Q3 AI semiconductor revenue to $16.0 billion, implying more than 200% year-over-year growth. That is not what a broken thesis looks like; it is what a stock reset looks like when expectations got ahead of already elite execution.
The cleanest reason to stay constructive is that the core growth engine is still speeding up. Broadcom did not just post a big AI quarter; it guided to an even bigger one, with AI semiconductor revenue rising from $10.8 billion in Q2 to $16.0 billion in Q3. The stock fell more than 13% because that guide came in slightly below a $16.36 billion consensus view, but missing perfection by a few hundred million dollars is not the same thing as seeing demand crack. If anything, the reaction says more about how crowded the expectations trade had become than it does about Broadcom’s operating trajectory.
The broader financial profile makes that reset easier to buy. Broadcom’s TickerSpark Score sits at 78 overall, with Profitability at 100, Growth at 95, and Financial Health at 96. Those sub-scores line up with the actual business: 67.0% gross margin, 43.7% operating margin, and 38.8% net margin are elite numbers for a company still growing revenue 23.9% year over year. Earnings power is also moving fast, with EPS up 286.6% and net income up 292.3% year over year, which helps explain why the company has beaten consensus in 8 of its last 8 quarters.
The valuation argument is not as one-sided as the headline multiples make it look. A 60.56x trailing P/E and 23.58x sales multiple are rich, but the PEG ratio at 0.48 tells a different story when growth is this strong. Against ASML, Broadcom trades at a similar earnings multiple while delivering faster revenue growth, 23.9% versus 15.6%, and a higher net margin, 38.8% versus 29.7%. This is still an expensive stock, but it is expensive for a business that is scaling AI revenue into what management now sees as a $56 billion full-year 2026 opportunity, not for a company limping into deceleration.
The pushback is real, and it starts with the multiple. Broadcom is priced for flawless execution, and the market has become much less forgiving when even great companies fail to raise long-term targets. Management left its 2027 sales outlook unchanged, and that matters when customer concentration and supply constraints are part of the story. If a handful of hyperscalers drive the custom-chip narrative, any sign of diversification by a major customer can compress the multiple long before it dents reported revenue.
The chart also says this is not a momentum stock right now. AVGO is trading below its 20-day and 50-day moving averages, RSI is 38.17, and it is underperforming the Technology sector by 15.7 percentage points year to date. That weakness deserves respect. Still, those are reasons to treat this as a reset and not a chase, not reasons to pretend the underlying business suddenly stopped working.
What matters now is whether Broadcom can turn the post-earnings disappointment into a new base before the next report around early September. We would respect the fact that the stock is still above its 200-day moving average, but this is a name to build into on weakness rather than size aggressively all at once. The setup works if management keeps converting AI demand into booked revenue and reinforces that 2026 and 2027 supply is intact.
The trigger that would change our mind is straightforward: a real slowdown in AI semiconductor growth, not another quarter of merely missing inflated whispers. Until that happens, the market is treating AVGO like a story that peaked, while the numbers still show a company compounding at extreme scale. That is the kind of disconnect contrarian buyers wait for.
