Jim Cramer points to “measured” Broadcom guidance as selloff fades, while analysts weigh unmet AI expectations

Broadcom Inc. is still drawing attention from high-profile market commentary even after its fiscal second-quarter results, with Jim Cramer using the company as an example of how markets can move past what investors initially call “disappointing” news. On “Mad Money,” Cramer highlighted Broadcom (NASDAQ: AVGO) alongside other names, saying the stock’s pre-quarter run-up was steep and that the subsequent earnings tone may not be “as crushing as we think.”

In a clip reprinted by Insider Monkey, Cramer described the parabolic move into the quarter as a warning sign and pointed to a pattern he has associated with Broadcom: offering a measured forecast at the time, then producing stronger results later. He characterized the latest quarter’s reaction in that context, arguing that the market’s expectations were likely set too high going in.

That framing matters because Broadcom’s underlying numbers were strong, even as investors reacted to what they saw as modest disappointment in its AI-related outlook. On June 3, Broadcom reported fiscal second-quarter results for the period ended May 3, posting quarterly revenue of $22.2 billion, up 48% year over year, and net income of $9.31 billion, up 88%. The company also reported record operating profit and free cash flow, supported by rapid expansion in its AI semiconductor business.

Broadcom’s earnings also showed how central custom AI hardware and supporting components have become to the company’s results. In the quarter, the company said AI semiconductor revenue was $10.8 billion, up 143% year over year, driven by demand for custom AI accelerators and AI networking. Management also guided third-quarter fiscal 2026 revenue to approximately $29.4 billion, representing 84% growth year over year, and it projected AI-related momentum to remain a major driver of both growth and profitability.

Even with those growth rates, Reuters reported that Broadcom missed Wall Street expectations for second-quarter revenue and, more importantly for the stock’s near-term tone, indicated AI chip revenue guidance of $16 billion for the current third quarter that was slightly below analyst estimates. Reuters also said Broadcom’s CEO left a prior 2027 sales forecast unchanged, which reinforced investors’ concerns about whether the AI buildout will accelerate as quickly as the market has priced in.

Reuters’ reporting also highlighted that the competitive backdrop is not standing still. It noted that rivals are gaining share with hyperscale customers and that competition in custom chips and adjacent platforms is tightening as AI inference demand grows, meaning companies that can deliver application-specific performance and integrate smoothly into data centers may win incremental design wins.

Sector context helps explain why Broadcom’s guidance became the focal point. Broadcom occupies a rare position in today’s AI supply chain, sitting at the intersection of semiconductor design and enterprise infrastructure software. That mix can make the stock appear resilient on fundamentals, but it also means the market tends to treat any hint of “expectations reset” as potentially large, because valuations in AI-linked names are often sensitive to forward growth trajectories.

The uncertainty, for now, is less about whether Broadcom is growing and more about the pace of that growth relative to what investors want to see. Cramer’s point, echoed by the way the market parsed the results, is essentially a timing argument: measured guidance and a “cooling” reaction do not necessarily mean demand is breaking. Still, the next read-through will likely come from whether subsequent updates show AI semiconductor momentum rising in line with (or above) the long-range forecasts Broadcom has reiterated, and from how Broadcom’s custom AI supply commitments translate into revenue beats rather than just visibility.