Broadcom Inc.

🇺🇸NASDAQ Global Select
Back to all articles
Broadcom Inc. stock analysis AVGO overview
Bearish -50

Why Broadcom's stock is falling so hard after earnings

📉 Broadcom's stock fell more than 12% on Thursday after its earnings report failed to meet high expectations.

💻 The company reiterated its $100 billion AI chip revenue outlook for next year instead of raising it amid market demand for increases.

🤖 Guidance for current quarter AI chip revenue growth exceeding 200% to $16 billion missed Wall Street targets.

💸 The stock decline erased $286 billion in Broadcom's market cap, marking the worst single-day loss in Micron's history.

⚠️ TD Cowen analyst Joshua Buchalter noted that maintaining growth expectations without a raise will disappoint investors seeking material beats.

📉 Gross margins are expected to decline due to revenue balance between software and chips businesses plus uncertainty over custom chip projects.

🤝 Evercore ISI analyst Mark Lipacis suggested Broadcom is losing part of its business with Google to MediaTek for future generations.

📈 Despite the drop, Broadcom shares have advanced 38% on the year and 51% over the past three months.

💡 Analysts believe Broadcom will support about 10 gigawatts of custom chip deployments next year, adding material upside to AI revenue.

🖥️ Broadcom's VMware software business offers opportunities to benefit from surging demand for central processing units.

📅 Bernstein analyst Stacy Rasgon expects 2027 performance to be weighted toward the back half as custom chip projects ramp up.

⏳ The company may see stronger growth in its software and non-AI chip business before the 2027 turnaround.

🛑 Analysts suspect shares may take a pause for the next couple of quarters before the story becomes interesting again in 2027.

Bullish Signals
  • Broadcom will likely support about 10 gigawatts of custom chip deployments across its customer base next year, which would add material upside to its AI chip revenue.
  • Broadcom's VMware software business gives it an opportunity to benefit from surging demand for central processing units driven by the current agentic AI wave and shift to inference.
  • Analyst Stacy Rasgon notes that 2027 performance will likely be weighted toward the back half of the year when custom chip projects ramp up, potentially leading to a materially higher run-rate into 2028.
  • For now, Broadcom is expected to see stronger growth in its software and non-AI chip business as it navigates the current market environment.
Risk Factors
  • Broadcom's stock dropped more than 12% on Thursday, erasing $286 billion in market capitalization.
  • The company maintained its AI revenue outlook for next year at $100 billion rather than raising it, despite Wall Street expectations for a material beat and raise.
  • Guidance for AI chip revenue to jump more than 200% in the current quarter to $16 billion fell below analyst targets.
  • TD Cowen analyst Joshua Buchalter noted that maintaining growth expectations without raising them is likely to disappoint investors.
  • There is uncertainty over some of its custom chip projects, which could weigh on the stock in the near term.
  • Evercore ISI analyst Mark Lipacis suggested that Broadcom is losing part of its business with Google to MediaTek as the tech giant reportedly looks to work with the Taiwanese designer on future generations.
Full Analysis
Broadcom's (AVGO) shares dropped more than 12% on Thursday following its earnings report, erasing $286 billion in market capitalization. The decline occurred because the company maintained its AI revenue outlook for next year at $100 billion rather than raising it, despite Wall Street expectations for a material beat and raise in a market clamoring for growth. Additionally, Broadcom's guidance for AI chip revenue to jump more than 200% in the current quarter to $16 billion fell below analyst targets. Analysts cited several reasons for the stock's underperformance. TD Cowen analyst Joshua Buchalter noted that maintaining growth expectations without raising them is likely to disappoint investors, while also pointing to compressing gross margins due to the balance between software and chip businesses and uncertainty over custom chip projects. Evercore ISI analyst Mark Lipacis suggested that Broadcom is losing part of its business with Google to MediaTek, as the tech giant reportedly looks to work with the Taiwanese designer on future generations. Despite the near-term headwinds, analysts see potential upside in 2027. Bernstein analyst Stacy Rasgon expects 2027 performance to be weighted toward the back half of the year when custom chip projects ramp up, potentially leading to a higher run-rate into 2028. Buchalter also noted that Broadcom will likely support about 10 gigawatts of custom chip deployments next year, adding material upside to AI chip revenue, while its VMware software business offers opportunities from surging demand for central processing units driven by the agentic AI wave and shift to inference.