$AVGO A look at Broadcom's earnings report from yesterday

After yesterday's market close, chip giant Broadcom (AVGO) released its fiscal 2026 third-quarter earnings report. The report could be described as having both "pleasant surprises" and "nasty surprises."

First, the pleasant surprises: Third-quarter revenue was $29.591 billion, up 86% year over year and exceeding market expectations of $29.362 billion. GAAP net income was $13.088 billion, up 216% year over year. Adjusted earnings per share were $3.32, also beating expectations of $3.23.
The most explosive figure came from the AI semiconductor business—revenue reached $16.7 billion, up 221% year over year and 54% sequentially. Keep in mind that the entire Semiconductor Solutions segment generated just $20.839 billion in revenue, meaning AI accounted for 80%.
Broadcom CEO Hock Tan directly raised the fiscal 2026 AI revenue guidance from $56 billion to $58 billion on the earnings call, representing 186% year-over-year growth. He also put out an even bigger forecast: By 2027, AI revenue will double to approximately $115 billion, and double again to $230 billion in 2028. The company's EPS could surpass $30.
How staggering is that figure? Broadcom's $230 billion in AI revenue in 2028 would be nearly twice the company's current total annual revenue. Broadcom currently designs custom AI accelerator chips for companies including Google, Meta, and OpenAI. The company highlighted the custom Jalapeno chip co-developed with OpenAI in the third quarter. Hock Tan said during the earnings call that Broadcom has begun volume deliveries of Google's next-generation TPU 8i products, adding that their performance is on par with or better than NVIDIA's Vera Rubin.

Now for the "nasty surprise": After the earnings report was released, Broadcom's stock price briefly plunged more than 6% in after-hours trading. The reason was the fourth-quarter revenue guidance—the company expects Q4 revenue of approximately $34.8 billion, below market expectations of $35.03 billion.
That's how the market works: Managing expectations is more important than anything else. Strong performance is considered a given, but if you provide a "next-quarter outlook" below expectations, capital immediately heads for the exit. Interestingly, during the earnings call that followed, Broadcom's stock price turned from a decline to a gain. The sharp V-shaped after-hours rebound showed that after hearing the CEO's outlook for the future, the market regained confidence.
Broadcom's stock performance this year has actually lagged the broader market—as of Wednesday's close, it had risen only about 6% since the start of 2026, while the S&P 500 had gained 12% over the same period. But since ChatGPT ignited the AI boom at the end of 2022, Broadcom's stock price has surged more than sixfold, bringing its market capitalization to approximately $1.8 trillion.
For value investors, the core logic of Broadcom's earnings report is actually quite clear:
There is volatility in the short term (Q4 guidance is slightly below expectations), support in the medium term (AI revenue continues to grow rapidly), and room for imagination in the long term (AI revenue doubles consecutively in 2027 and 2028).
As for whether to allocate to the stock at this level, that depends on whether you are a short-term trader looking at three months or a long-term holder looking at three years.$AVGO ‌