Key Stats for Broadcom Stock
- Pre-market Price Change for Broadcom stock: -4.5%
- $AVGO Share Price as of Dec. 11: 406
- 52-Week High: $415
- $AVGO Stock Price Target: $412
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What Happened?
Broadcom (AVGO) stock is down over 4% in pre-market despite delivering a strong earnings beat and issuing bullish guidance for the coming quarter.
The semiconductor giant reported fourth-quarter earnings of $1.95 per share on revenue of $18 billion, beating analyst estimates on both metrics.
The company also guided for first-quarter revenue of $19.1 billion, representing 28% year-over-year growth and significantly above Wall Street’s $18.3 billion estimate. CEO Hock Tan said AI chip revenue is expected to double to $8.2 billion in the current quarter.
However, AVGO stock sold off during the earnings call as investors appeared concerned about longer-term margin pressure.
Broadcom revealed it has $73 billion in AI-related backlog over the next 18 months. Still, a significant portion will come from lower-margin system sales rather than higher-margin chip sales alone.
During the call, management disclosed that Anthropic was the previously unnamed fourth customer that placed a $10 billion order for Google’s tensor processing units. Broadcom also announced a fifth custom chip customer, though the company declined to provide details.
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What the Market Is Telling Us About Broadcom Stock
The selloff in AVGO stock suggests investors are looking past the strong near-term numbers and focusing on profitability concerns.
While AI revenue is accelerating dramatically, Broadcom’s shift toward selling complete rack systems rather than just chips will pressure gross margins downward.
CFO Kirsten Spears acknowledged that margins will compress as the company passes through more third-party components in system sales, similar to how memory costs flow through in its custom accelerators.
Management said operating leverage should help offset some margin pressure, but didn’t provide specific targets.
Despite the post-earnings decline, AVGO stock remains up over 71% year-to-date as the company continues capturing AI spending alongside Nvidia.
Broadcom’s custom chip business is winning major customers, including Google, Meta, and now Anthropic, validating its strategy of offering alternatives to merchant GPUs.
The $73 billion backlog provides strong revenue visibility, though management noted this figure will grow as new orders come in over the 18-month delivery window.
Broadcom also raised its quarterly dividend 10% to $0.65 per share, marking the 15th consecutive annual dividend increase.
Investors should monitor whether AVGO stock can sustain its premium valuation as the business mix shifts and margins face pressure in fiscal 2026.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
