Broadcom (NASDAQ:AVGO) delivered another quarter of solid growth on Wednesday, beating Wall Street’s expectations on both earnings and revenue, while issuing guidance that also topped forecasts. Yet, shares fell ~13% in after-hours trading, suggesting investors were looking for even more from one of the market’s biggest AI winners.

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For the fiscal second quarter, Broadcom reported adjusted earnings of $2.44 per share on revenue of $22.19 billion, representing year-over-year growth of 48%. Both figures came in ahead of analyst estimates of $2.39 per share and $22.13 billion in revenue, respectively. The company also guided for ~$29.4 billion in third-quarter revenue, above the consensus forecast of $28.25 billion.

One area that appears to have frustrated investors was Broadcom’s outlook for AI semiconductor revenue. The company guided for ~$16 billion in AI semiconductor sales during the third quarter, slightly below some bullish forecasts. However, 5-star D.A. Davidson analyst Gil Luria believes the guidance was conservative and likely reflects shipment timing and prudent expectation management rather than any deterioration in demand.

Supporting that view, management disclosed roughly $30 billion in AI bookings during the quarter, underscoring the strength of demand for the company’s custom AI accelerators and networking products. The quarter itself was powered by Broadcom’s AI-related semiconductor business. Semiconductor revenue climbed 79% year-over-year to $15 billion, while infrastructure software revenue increased 9% to $7.2 billion.

Luria believes the earnings call offered further evidence that the AI infrastructure buildout remains far from mature. He highlighted management’s comments indicating that demand for compute capacity continues to accelerate and that supply remains constrained.

As the analyst put it, “we are far from a state of equilibrium” as demand for compute continues to ramp.

The analyst also highlighted Broadcom’s longer-term outlook. While some investors had hoped management would raise its long-term fiscal 2027 AI revenue target, the company reiterated that AI revenue is expected to exceed $100 billion and stated that current trends are “on track if not stronger.” Management additionally pointed to substantial growth opportunities extending into fiscal 2028, with visibility now reaching further into the future than it did just three months ago.

Despite that constructive outlook, Luria continues to assign AVGO shares a Neutral rating, though he raises his price target from $375 to $400, which still implies a 16% downside from Wednesday’s closing price. In his view, Broadcom’s fundamentals remain strong, but after the stock’s enormous run, investors may require further evidence of accelerating AI growth before becoming more aggressive. (To watch Luria’s track record, click here)

Luria may be sitting on the sidelines for now, but the broader Wall Street view remains bullish. AVGO stock currently enjoys a Strong Buy consensus rating based on 24 Buy and 3 Hold recommendations. That optimism, however, has already been reflected in the share price. The average price target stands at $480.67, essentially in line with where shares closed on Wednesday. (See AVGO stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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