All eyes are on Broadcom this evening as the semiconductor giant prepares to release its quarterly results. The company’s shares have surged an impressive 76% since the start of the year, setting a high bar for the upcoming report. Wall Street’s anticipation is palpable, fueled by speculation of a multi-billion dollar AI contract, even as company insiders have been offloading hundreds of millions in stock.
High Stakes and Lofty Expectations
The consensus among analysts points to fourth-quarter revenue of $17.5 billion, representing a year-over-year increase of 24%. Adjusted earnings per share are projected to climb 30% to $1.87. However, the primary focus for investors will be the performance and outlook for the artificial intelligence segment. Market experts estimate that AI-related revenue alone could surpass the $6 billion mark this quarter, accounting for more than a third of Broadcom’s total sales.
The core of this growth narrative lies in the company’s custom AI chips, known as ASICs, designed for hyperscale cloud providers. This potential has prompted several financial institutions to revise their price targets upward. Morgan Stanley increased its target to $443, while HSBC set a more bullish target of $535, contending that the market continues to undervalue the long-term potential of this business line.
Adding to the pre-earnings intrigue are persistent rumors of a potential $10 billion order from a new, major customer. Market chatter suggests this could stem from a partnership with OpenAI or an expansion of the existing collaboration with Microsoft.
Valuation Concerns and Insider Activity
Despite the prevailing optimism, several cautionary signals are evident. The company’s gross margin is expected to face pressure, likely contracting by approximately 70 basis points. This compression is attributed to elevated costs associated with expanding High Bandwidth Memory production and integrating the recent VMware acquisition.
Should investors sell immediately? Or is it worth buying Broadcom?
Furthermore, the current valuation leaves little room for disappointment. With a forward price-to-earnings ratio hovering around 30, the stock is pricing in near-perfect execution. Options market activity implies an expected stock price movement of 6.8% following the earnings release.
Perhaps most notably, recent insider transactions have raised eyebrows. Over the past three months, Director Henry Samueli and CEO Hock Tan have collectively sold shares worth over $300 million. While such sales are often part of pre-arranged trading plans, the sheer magnitude at record levels has captured the market’s attention.
The Crucial Outlook
The earnings report, scheduled for 11:00 PM German time, will determine whether the recent rally sustains its momentum or stalls. A key element for investors will be management’s guidance for fiscal year 2026. The market seeks confirmation that annual AI revenue can accelerate beyond the current run-rate of $12 billion.
From a technical analysis perspective, the equity is trading in uncharted territory. A confirmed breakout above the $415 level could pave the way for a move toward $440 to $450. Conversely, if the forward guidance merely meets expectations, the stage could be set for a classic “sell-the-news” reaction, potentially testing support levels near $390.
Ad
Broadcom Stock: Buy or Sell?! New Broadcom Analysis from December 11 delivers the answer:
The latest Broadcom figures speak for themselves: Urgent action needed for Broadcom investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from December 11.
Broadcom: Buy or sell? Read more here...
