Broadcom (AVGO) has been a market darling in 2025 and a preferred expression of the AI thematic. Its strong relationship with Google, dominant position in the distribution of custom ASIC chips, solid pipeline of orders, and attractive revenue and earnings profile have all provided powerful tailwinds to the share price. However, after such an impressive run, expectations for earnings were sky high. The aftermarket reaction reflects a company that is, in many ways, a victim of its own success. Still, given the strength of the results, any pullbacks should be shallow, and the broader bull case remains intact.
Trader notes and overview
• Despite an impressive 75% gain YTD, Broadcom delivered a very strong Q4 result and guided to a big Q1 – more than justifying the market’s ongoing love affair with the stock.
• Positioning in AVGO is crowded – unsurprising given the powerful rally – but the latest 13F filings show AVGO is the 5th most-held stock among pension funds and investment advisors, and the 11th most-held among more dynamic hedge funds.
• Pepperstone 24-hour Broadcom CFDs initially rallied to $439.93 on the earnings release; however, during the CEO’s call with analysts, shares reversed course and traded -4.3% through the tail end of the post-market session.
• Buyers stepped up on the move below $380 on 3 December, and it would not be surprising to see this level defended once more.
• A high-volume rally back above $403 would signal a retest of the all-time high at $439.93 and reinvigorate long positions.
What pleased investors in AVGO earnings
• Strong AI chip demand saw AVGO guide Q1 sales to about $19.1b vs analysts’ expectations of $18.4b.
• Q1 AI revenue guidance of $8.2b vs estimates of $6.8b. Management commentary suggesting momentum will continue into Q1.
• Greater clarity on the customer base, reinforcing Broadcom’s position (alongside Marvell) as the market leader in custom ASIC distribution. Anthropic added an additional $11b in orders. Capex increased to $273b, and even after adjusting for this outlay, AVGO generated $7.5b in free cash flow. While this was below Street expectations, any potential corporate bond issuance in 2026 should be well subscribed.
• CEO Tan noted he does not expect much revenue from OpenAI in 2026.
• Investors do not buy AVGO for income, but as a sweetener, AVGO increased its dividend by 10% to 65c.
What concerned investors in AVGO earnings
• CEO Tan noted the company has a backlog of $73b in AI-related orders over the coming six months. While this exceeded analysts’ central estimate of $69b, the negative initial reaction suggests investors had positioned for a stronger number.
• Tan later clarified that the $73b figure is a minimum, which may help stabilise flows.
• Guidance that Q1 gross margins could narrow by 1% on AI-related products was a mild negative – the market was looking for GMs to return to 77.17%, so a 1% decline was a little more than anticipated.
Good luck to all.
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