Analyst Targets (Post-Earnings)
- Deutsche Bank: Raised price target post-selloff — constructive long-term
- Erste Group: Upgraded AVGO after earnings-related decline, citing continued Q3 momentum
- Consensus 1Y Target: $486.85 | Current Range: $385–$411
Here’s the uncomfortable truth about Broadcom’s week: the quarter was genuinely strong. Revenue hit $22.19 billion, up 48% year-over-year. Adjusted EPS of $2.44 beat the $2.40 consensus. AI semiconductor revenue more than doubled — up roughly 143% annually to $10.8 billion. And yet the stock got hit for 12–15% depending on which session you’re measuring.
That gap is what this article is about.
What Actually Happened
The market wasn’t selling Broadcom’s results. It was selling what Broadcom didn’t say. CEO Hock Tan guided Q3 AI chip revenue to approximately $16 billion — a number representing more than 200% year-over-year growth — but Wall Street had quietly penciled in closer to $17.2 billion. More importantly, Tan held his full-year AI semiconductor target at “in excess of $100 billion” rather than raising it. After a stock that had surged nearly 40% year-to-date and hit multiple all-time highs in the sessions leading into earnings, investors needed something bigger. They didn’t get it.
Classic buy-the-rumor, sell-the-news. The prior session alone drew over 50 million shares of volume — more than double average — as traders aggressively positioned for what they assumed would be a blowout raise. That positioning made the stock fragile heading in.
The Numbers
- Revenue: $22.19B vs. $22.27B est. (slight miss)
- Adjusted EPS: $2.44 vs. $2.40 est. (beat)
- AI Semiconductor Revenue: $10.8B — more than doubled YoY
- Infrastructure Software Revenue: $7.18B vs. $7.32B est. (miss)
- Q3 Revenue Guidance: ~$29.4B vs. $28.53B Wall Street expected (beat)
- Net Income: $9.31B — up 88% YoY
The software segment — anchored by VMware — is the part people skipped over. It came in below the $7.32 billion estimate, adding a secondary layer of disappointment on top of the AI guidance reset. That combination hit valuation math hard on a stock trading at a P/E of roughly 66x TTM, well above its 5-year median of 43x.
Why It Still Matters
Broadcom’s custom AI chip model is genuinely differentiated. Unlike Nvidia’s GPU-dominant approach, Broadcom designs XPUs and ASICs alongside the networking silicon needed to connect thousands of chips inside hyperscale data centers. Its six confirmed custom chip customers include Anthropic, Google, Meta, and OpenAI — a roster that isn’t going anywhere. The company also noted it would now offer “chips only” rather than full integrated AI systems, which is a subtle strategic shift worth watching closely.
There’s also a steadier piece most traders ignored — the VMware infrastructure software arm produces recurring cash flow that cushions the lumpier chip cycle. That business doesn’t get the AI premium, but it is real.
Bull / Base / Bear
- Bull: Q3 revenue guidance of $29.4B exceeded estimates, AI revenue triples sequentially to $16B, and the $100B+ FY2027 AI target gets raised next quarter — sending the stock back toward $470+.
- Base: Stock consolidates in the $400–$430 range as the market digests elevated expectations. Analysts revise targets modestly lower but maintain buy ratings. Next catalyst is September earnings.
- Bear: Insider selling ($356M in the past three months, zero buys) accelerates, VMware growth disappoints again, and the stock revisits the $360–$380 zone as valuation multiples compress further.
Technical Overlay
The $430–$440 zone is the first major technical battleground. Holding above it preserves the broader bullish structure. The RSI entered earnings above 73 — overbought — and the CCI was above 240. MACD remains positive, meaning the longer-term uptrend is technically intact. This looks more like a momentum reset than a confirmed trend break. Traders should watch whether the stock stabilizes and rebuilds volume at current levels or continues to drift.
Bottom Line
Broadcom didn’t have a bad quarter. It had a quarter that was priced for something extraordinary — and delivered something merely excellent. The distinction matters. At current levels near $387, the stock trades at a forward P/E around 37, still above its three-year average but meaningfully cheaper than the highs. The long-term AI infrastructure thesis is intact. The question now is whether the market needs another quarter of data before trusting the setup again. That’s not a reason to panic. It might be a reason to be patient.
For informational purposes only.
