An upbeat quarter doesn’t seem like enough to send Broadcom’s stock higher after a strong run so far this year.

Broadcom shares fell nearly 6% before the market open on Friday after the chipmaker warned growing sales of lower-margin custom AI processors were squeezing profitability, sparking worries that the business may be less lucrative.

Investors pulled back from the chip firm despite beating Wall Street’s expectations for quarterly earnings and revenue.

Broadcom posted October quarter results on December 11 after markets closed. The company’s revenue came in at $18.02 billion, solidly beating expectations of $17.46 billion. Meanwhile, adjusted earnings per share (EPS) rose 37% to $1.95, beating expectations of $1.87.

Benchmark: With Broadcom's stock climbing more than 120% over the past year, profit-taking would have triggered a selloff regardless of the latest results, Acree said. The latest release included Anthropic orders of $21 billion over the past two quarters and an AI order backlog of $73 billion over the next six months, he added.

Yesterday we were watching whether Broadcom could sustain its AI momentum and deliver guidance that justified its 75% rally this year. The company beat on both revenue and earnings after the bell, and CEO Hock Tan delivered the kind of forward commentary investors wanted to hear.

Broadcom posted better-than-expected earnings on AI demand, and said it sees that momentum continuing in the current quarter.

Goldman Sachs analyst Kash Rangan lowered its price target to $220 from $320, while maintaining a neutral rating. Rangan cited modest reported revenue growth and noted that higher capital expenditures and free cash flow burn increased concerns over Oracle’s growing financial needs.