AVGO Earnings: $16 Billion AI Revenue on the Line

Broadcom reports fiscal Q3 after the close with AI revenue guided to $16 billion, up more than 200% year-over-year, as AVGO trades roughly 25% below its $495 52-week high.

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Why Did AVGO Sell Off 25% From Its Peak?

The stock's retreat from $495 traces directly to the June 3 fiscal Q2 print. Broadcom beat top- and bottom-line estimates -- posting revenue of $22.19 billion, up 48% year over year, with AI chip sales reaching $10.8 billion, a 143% year-over-year increase -- but Tan's Q3 AI revenue guidance of $16 billion landed below the most aggressive analyst projections of $17.2 billion. Shares shed roughly 12% in after-hours trading and extended those losses the following session. A subsequent note flagging $370 billion in aggregate AI-related debt across the semiconductor sector pushed AVGO down an additional 6% in a single August session, compressing the stock to its current range near $371.

What Does Wall Street Expect From Q3?

Consensus targets Q3 revenue of $29.43 billion and non-GAAP earnings per share of $3.22, representing approximately 90% year-over-year earnings growth. Gross margins are projected to compress to roughly 74%, down from recent highs, as the revenue mix shifts toward lower-margin AI accelerators -- including custom tensor processing units produced for hyperscale customers. The $16 billion AI revenue figure is management's own guidance; consensus has aligned to it rather than above it, a departure from the pattern of analysts ratcheting estimates ahead of print. The decisive variable is not Q3 itself but forward guidance: Broadcom has publicly projected fiscal 2026 AI revenue at $56 billion and a longer-range target exceeding $100 billion. Whether Tan raises, reaffirms, or qualifies those figures will determine the market's reaction more than the headline beat.

Is the $100 Billion AI Revenue Target Still Intact?

It remains intact as of the last public guidance, with management reaffirming the figure through the Q2 print despite the market selloff that followed. The framework is anchored by long-term custom silicon agreements with three hyperscale customers building out their own AI accelerator programs. With fiscal 2026 running at roughly $56 billion in AI semiconductor revenue, sustaining the trajectory toward 2027 requires continued acceleration in both volume and customer diversification.

Why Did Third Point Exit Broadcom?

Dan Loeb's Third Point disclosed the full liquidation of its Broadcom position during Q2, closing approximately 50,000 shares valued at $15.5 million. The move was part of a broader rotation: Third Point simultaneously exited Nvidia (NVDA) and Meta, pivoting into Taiwan Semiconductor (TSM) -- where the fund accumulated roughly 460,000 shares worth approximately $219 million -- and Alphabet (GOOG). The positioning reflects a thesis favoring companies at the hardest-to-replicate chokepoints of AI infrastructure -- foundry capacity and hyperscale software platforms -- over fabless chip designers, where competitive entry risks are relatively higher. Stanley Druckenmiller executed a parallel exit from Broadcom over the same period. Neither fund has offered public comment on the decision ahead of Wednesday's report.

Outlook

Broadcom's September 2 report is the defining AI earnings event of the quarter for semiconductor stocks and among the most consequential for the broader ai stocks universe. A 200%-plus year-over-year surge in AI chip revenue is priced in; the question is whether Tan's forward outlook reaffirms the company's $100 billion-plus ambition or introduces a cautious adjustment that, as in June, overshadows the headline beat. The analyst consensus average price target of approximately $519 implies more than 40% upside from current levels, but reclaiming ground toward the $495 52-week high will require guidance that exceeds both the number and the confidence investors assigned to it six months ago.