Broadcom (AVGO) has notably lagged the S&P 500 this year, posting a gain of only about 6% while the broader index has delivered a stronger performance. That dynamic could shift on September 2, when the chipmaker reports fiscal 2026 third-quarter results after the market close. The key question for investors is whether a strong outlook can help the stock close the gap that has opened up since the start of the year.
The past twelve months have been turbulent for Broadcom shares. After falling more than 20% from an all-time high, the stock rebounded to set a new record before retreating again. It currently sits more than 23% below its peak. Much of that volatility reflects uncertainty over the durability of artificial intelligence demand and how long the current pace of AI adoption can be sustained.
Broadcom occupies a distinctive position in the AI infrastructure landscape. Its portfolio spans semiconductors, software, networking, and security solutions serving cable, mobile, broadband, and data center industries. The company has said that 99% of internet traffic crosses at least one Broadcom chip. Since the generative AI boom began in late 2022, demand for Broadcom’s application-specific integrated circuits, or ASICs, has surged because they can be customized to accelerate AI workloads while offering better energy efficiency than graphics processing units. The company’s networking products are also embedded across data center operations.
Recent results underline that momentum. In the fiscal 2026 second quarter ended May 3, revenue climbed 48% year over year to $22.2 billion, while adjusted earnings per share rose 54% to $2.44. AI semiconductor sales jumped 143% to $10.8 billion, accounting for nearly half of total revenue. Management expects growth to accelerate further. Third-quarter guidance calls for revenue of $29.4 billion, up 84% from a year earlier, and adjusted EBITDA of roughly $20 billion, an increase of 87%. That outlook implies a 32% sequential jump from the second quarter.
Some investors have worried that Marvell Technology’s partnership with Alphabet could divert orders away from Broadcom. However, Broadcom’s third-quarter guidance indicates AI semiconductor revenue is expected to grow at least threefold year over year to $16 billion. That suggests major customers are not slowing their purchases. Alphabet already works with both Nvidia and AMD, so maintaining relationships with multiple ASIC suppliers is not unusual for the company.
Recent earnings reactions across the technology sector offer a useful reference. Nvidia shares rose nearly 9% in a single day after the company reported fiscal 2027 second-quarter results on August 26. Nvidia posted revenue of $96.2 billion, well above its $91 billion guidance, and issued a next-quarter forecast of $108 billion. Arista Networks gained nearly 4% following its quarterly report earlier this month, while Palantir Technologies surged almost 30% in one day after reporting results in early August. Those moves indicate that the market is still rewarding better-than-expected AI-driven results.
Broadcom has a track record of beating expectations and raising guidance at the same time, a pattern investors tend to reward. Valuation also appears reasonable, with the stock trading at a forward price-to-earnings multiple of about 20, which is not expensive for a large technology company. If third-quarter results meet or exceed the $29.4 billion revenue target and management offers an upbeat outlook, the stock could have meaningful room to recover.
Nvidia serves as a useful comparison. Because Nvidia is much larger, exceeding guidance is more difficult, yet the company still managed to deliver a substantial beat. Broadcom has not reached the same scale in the ASIC market, which could make it easier for the company to surpass expectations and send a positive signal. If the upcoming report confirms that AI demand remains robust, Broadcom may be positioned to narrow its gap with the S&P 500 and potentially regain market leadership.
