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Broadcom reported revenue and profits that eclipsed analysts’ consensus estimates, but the stock plummeted in response.
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Profit-taking was the likely culprit, but Wall Street was universally bullish.
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Broadcom’s valuation is much more palatable in the wake of the unwarranted sell-off.
The dawn of artificial intelligence (AI) in early 2023 has caused a paradigm shift in the technology landscape. The ability of these sophisticated algorithms to create original content — including text, images, audio, and computer code — promises to unleash a windfall of profits by increasing worker productivity and automating mundane and time-consuming tasks.
The first wave of AI was characterized by the rapid adoption of graphics processing units (GPUs), which offer the flexibility and computational horsepower for a broad range of AI tasks. Unfortunately, these AI workhorse chips consume a significant amount of power.
Users are now transitioning to the next phase of AI adoption, seeking more energy-efficient alternatives, and Broadcom (NASDAQ: AVGO) is profiting from this shift. The company’s Application-Specific Integrated Circuits (ASICs) can be customized to a specific task, making them more cost-effective for those instances. The increasing adoption was clear in its financial report.
For its 2025 fiscal fourth quarter (ended Nov. 2), Broadcom delivered results that surpassed already bullish expectations with ease. The company generated record revenue of $18.01 billion, which increased 28% year over year, driving adjusted earnings per share (EPS) of $1.95, which climbed 37%.
This was well ahead of analysts’ consensus estimates, which called for revenue of $17.46 billion and adjusted EPS of $1.87.
Broadcom’s momentum continued, as its AI-centric revenue soared 74% year over year, marking the 11 successive quarter of accelerating gains. During the earnings call, CEO Hock Tan noted that the demand for the company’s AI accelerators, AI switches, and other data center products was unprecedented. “We have never seen bookings of the nature [like] what we have seen over the past three months.” He also revealed that, in addition to its $10 billion order last quarter, AI start-up Anthropic added an additional $11 billion order to be filled in the coming year.
In response to the company’s blockbuster earnings, Broadcom sold off, pushed lower by a rash of profit-taking. This is understandable, given the stock’s epic run over the past year, notching gains of 125% heading into its financial report. The stock fell as much as 12% in the wake of Broadcom’s report, but Wall Street took a different view.