Key Highlights

  • AVGO shares are down 3.25% to $355.30 in pre-market trading.
  • Fiscal third-quarter consolidated Revenue rose 86% year over year to $29.6 billion, with AI semiconductor revenue surging 221% year over year to $16.7 billion.
  • Fourth-quarter revenue guidance of $34.8 billion fell short of the $35.03 billion consensus estimate.
  • CEO Hock Tan detailed expanding custom chip Demand from Google, Anthropic, and OpenAI, projecting AI semiconductor revenue to reach $115 billion in fiscal 2027 and $230 billion in fiscal 2028.
  • Several firms raised price targets following the report, including BMO to $575, Cantor Fitzgerald to $600, and Evercore ISI to $578.

Shares Pull Back Despite a Blockbuster Quarter

Broadcom (NASDAQ:AVGO) shares are pulling back sharply in pre-market trading despite blockbuster fiscal third-quarter results. The company reported record consolidated revenue of $29.6 billion, up 86% year over year, with Operating Margin of 67.9% and non-GAAP EPS of $3.32, up 96% year over year, alongside record free Cash Flow of $13.7 billion, representing 46% of revenue.

AI semiconductor revenue grew 221% year over year to $16.7 billion, driven by TPU shipments to Google and Anthropic, along with jalapeno chip shipments to OpenAI.

Investors Focus on a Guidance Miss

Despite the strong quarter, investors are focused on fourth-quarter revenue guidance of $34.8 billion, which fell short of the $35.03 billion consensus estimate. Full 2026 AI revenue is now expected at $58 billion, up from a prior guidance of $56 billion, though the sequential guidance miss appears to be weighing on sentiment today.

Long-Term AI Growth Narrative Remains Intact

CEO Hock Tan detailed expanding custom chip demand from Google, Anthropic, and OpenAI, projecting AI semiconductor revenue to reach approximately $115 billion in fiscal 2027 and double again to approximately $230 billion in fiscal 2028. Anthropic is expected to become Broadcom's largest custom chip customer by 2027 to 2028, with visibility to 16 gigawatts of deployment, while OpenAI is expected to become the second-largest customer.

Analysts Largely Remain Bullish Despite the Pullback

Several firms raised price targets following the report, including BMO to $575, Bernstein to $575, Cantor Fitzgerald to $600, and Evercore ISI to $578, suggesting the Sell-Side remains largely bullish on the long-term AI growth story even as the stock is under near-term pressure. Broader software and tech sector weakness, alongside rising Treasury yields, also appears to be contributing to today's decline.