Broadcom Earnings Preview: AI Revenue May Nearly Double, but Strong Performance May Not Save the Stock Price

Broadcom will release its earnings after the close on Wednesday. Wall Street expects the company to report strong results, but media reports suggest that, based on recent trading trends, even if the company exceeds already high market expectations, it may not be enough to reverse the downward trend in the stock price over the past few months.

Broadcom’s stock has fallen 24% from its all-time high in December last year, significantly underperforming the S&P 500 index. This round of sell-off is part of a broader retreat by investors from large tech stocks. The market is concerned about whether the billions of dollars companies are investing to develop artificial intelligence capabilities can be sustained long-term.

Currently, Broadcom is the seventh-largest company by market capitalization in the S&P 500, with a market cap of about $1.5 trillion. The company is a chip partner for AI giants like Alphabet and is directly benefiting from this wave of AI investment.

AI Revenue Could Double; Watch for Backlog Orders

Analysts believe that, while these concerns could materialize in the future, Broadcom’s fundamentals still look solid at present.

They expect the company’s adjusted earnings per share for the first quarter of this fiscal year to grow 27% year-over-year to $2.03; revenue is forecasted to increase 29% year-over-year to approximately $19.3 billion. Of particular note, AI-related sales are expected to nearly double to about $8.2 billion. If the company provides an optimistic outlook, Wall Street won’t be surprised.

Paul Meeks, head of technology research at Freedom Capital Markets, said:

“Broadcom will definitely release a lot of positive news. But the question is, does it really matter?”

He cited Nvidia’s stock performance after last week’s earnings report as an example. Nvidia’s results beat Wall Street expectations, and due to strong product demand and plans by large cloud providers to increase capital expenditure, the company also raised its guidance. However, within two trading days of the earnings release, Nvidia’s stock still fell 9.4%, marking its worst two-day performance since April.

After releasing its previous earnings report in December, Broadcom’s stock also experienced a sharp decline, dropping over 11% in a single day—the largest one-day drop in nearly a year. The issue then was that the company disclosed a backlog of $73 billion in AI product orders for the next six quarters, which was below market expectations.

Therefore, investors will naturally focus on whether the AI order backlog has been updated this time. Additionally, the market will watch for progress on Broadcom’s development of tensor processing unit (TPU) chips for Google. Orders from Google are expected to increase significantly in the second half of this year. Meanwhile, Broadcom’s collaboration with OpenAI is also expected to drive business growth through 2027.

Analysts: Broadcom Has a “Deep Moat”

Shaon Baqui, senior technology research analyst at Janus Henderson, said:

“For Broadcom, it’s very important to emphasize their real strength in designing large custom chips.”

“They have developed seven generations of TPU chips for Google, with a very mature partnership record. The ability to deliver products generation after generation is crucial, especially when competing with Nvidia.”

“Manufacturing such massive AI acceleration chips is very difficult. I think Broadcom needs to highlight that they actually have a pretty deep moat in this field.”

Another concern from Broadcom’s last earnings report was profit margins. At that time, CEO Hock Tan said that AI-related sales were dragging down margins. Market expectations are that Broadcom’s adjusted gross margin for the first quarter will be around 77%, down from 78% in the previous quarter and 79% a year ago.

Analysts may also raise questions about the company’s software business, which accounted for 42% of total revenue in 2025. Historically, this segment has been viewed as an important buffer to balance semiconductor cycle fluctuations. However, recent declines in software stocks have also put pressure on Broadcom’s stock price.

Meeks from Freedom Capital said:

“It will be interesting to see how they disclose this segment’s situation, including their guidance for the future.”

“During the earnings call Q&A, they will likely be directly asked about the role of the software business in the company’s overall strategy. In the past, this was a good risk diversification source, but in the AI era, the market now views it as a burden.”

Stock Is Cheaper But May Not Rebound

One result of the recent stock decline is that Broadcom’s valuation has become cheaper. Still, the stock could potentially fall further. Currently, Broadcom’s forward P/E ratio is about 27, which is below the peak of 42 in December last year but still significantly above its five-year average of 22 and higher than Nvidia’s approximately 21.

Options traders expect the stock to experience significant volatility after the earnings release. Market pricing indicates that the stock could fluctuate within about 7% up or down.

Bloomberg industry analyst Kunjan Sobhani said there are three factors that could push the stock higher: announcing new large cloud clients with significant revenue contribution, a substantial increase in AI order backlog within the same period, or positive comments from Hock Tan regarding collaborations with OpenAI and Anthropic.

“But given the recent pessimism in the tech earnings season, even these positives may not lead to a substantial rebound in Broadcom’s stock.” Sobhani added:

“It seems that the better the company performs, the worse the stock reacts—at least this earnings season.”

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