Broadcom Inc (NASDAQ: AVGO) reported a 221% year-over-year surge in third-quarter AI-related revenue to $16.7 billion, beating consensus estimates of $15.9 billion. The chipmaker also raised its fiscal 2027 AI revenue guidance to $115 billion, citing robust demand that continues to outpace current supply capabilities.

Earnings Performance

Broadcom’s total revenue for the quarter reached $29.6 billion, exceeding the consensus estimate of $29.2 billion. Earnings per share came in at $3.32, topping the expected $3.22.

The AI segment drove the growth, with XPU revenues up 250% year-over-year and networking revenues rising more than 150%. Sequentially, AI revenue grew by 54%. For the fourth quarter, management guided total revenue at $34.8 billion, in line with expectations, though implied earnings of $3.79 per share fell slightly short of the consensus estimate of $3.85 per share.

Long-Term Guidance and Supply Constraints

Broadcom significantly upgraded its long-term outlook, projecting AI revenue of approximately $230 billion in fiscal 2028. This implies total fiscal 2028 revenue of around $285 billion, which is about $50 billion above consensus estimates. Management also guided fiscal 2028 earnings to exceed $30 per share, well above the consensus of $26.38 per share.

Despite the strong numbers, analysts note that the company remains "severely supply-constrained." Rosenblatt Securities analyst Sajal Dogra highlighted that while Broadcom has secured sufficient supply to support these figures, factors such as power availability, shell readiness, and physical deployment continue to constrain the outlook. Demand is currently running above the company’s guidance levels.

Cantor Fitzgerald analyst C.J. Muse noted that buy-side expectations for fiscal 2027 AI revenue were as high as $140 billion, whereas Broadcom raised its guidance from a prior outlook of over $100 billion to $115 billion. JPMorgan analyst Harlan Sur added that Broadcom expects AI semiconductor revenue to double from around $58 billion in fiscal 26 to about $115 billion in fiscal 2027, then double again to approximately $230 billion in fiscal 2028.

Analyst Reactions

Several major banks raised their price targets following the results:

• Rosenblatt Securities: Reiterated Buy rating, raised price target from $500 to $600.
• Cantor Fitzgerald: Maintained Overweight rating, lifted price target from $525 to $600.
• KeyBanc Capital Markets: Reaffirmed Overweight rating and price target of $575.
• JPMorgan: Maintained Overweight rating and price target of $580.

JPMorgan analyst Harlan Sur noted that Broadcom’s customer diversification, including deals with Alphabet Inc (NASDAQ: GOOGL), Meta Platforms Inc (NASDAQ: META), Anthropic, and OpenAI, is a strong positive. He suggested that if Broadcom faces similar supply constraints as NVIDIA Corp (NASDAQ: NVDA), underlying demand could exceed $145 billion in fiscal 2027 and $270 billion in fiscal 2028.

Rosenblatt Securities analyst Sajal Dogra stated that upside to this outlook would depend on "Broadcom's ability to unlock additional supply capacity and on customers completing their data-center deployments on schedule." He further noted this creates a "longer and stronger revenue pipeline" for the company as roughly 30GW is deployed through fiscal 2028 and beyond.

Market Reaction

Shares of Broadcom declined 6.7% to $342.61 on Thursday, falling to levels last seen in April 2026. At one point, shares had declined by 5.44% to $347.27. Despite the drop, Future Fund Managing Partner Gary Black viewed the reaction as an overreaction, pointing to CEO Hock Tan’s comments that AI chip demand exceeds shipping capabilities. The stock trades within a 52-week range of $289.96 to $495.00.

What the Numbers Show

The divergence between the stock price decline and the significant beat on AI revenue estimates suggests market focus on near-term valuation rather than operational execution. With Q3 AI revenue beating estimates by $800 million and FY26 guidance raised by $2 billion, the data indicates accelerating monetization of AI infrastructure demand. However, the explicit mention of supply constraints limiting the realization of even higher potential demand ($145bn+ in FY27) highlights a structural bottleneck that may temper immediate growth trajectories despite the massive order book.

Broadcom Inc (NASDAQ: AVGO) shares fell 3.1% in premarket trading after the company reported a fiscal third-quarter earnings beat but issued fourth-quarter revenue guidance that missed Wall Street expectations.

CEO Hock Tan stated that customer demand significantly outpaces current supply capabilities, though deployment is constrained by land, power, shell availability, and high-bandwidth memory shortages.

Q3 Results and Q4 Guidance

Broadcom reported Q3 revenue of $29.59 billion, surpassing the $29.36 billion estimate. Adjusted earnings per share came in at $3.32, beating the $3.24 consensus. AI semiconductor revenue for the quarter reached $16.7 billion, growing 221% year-over-year and 54% quarter-over-quarter.

However, the company guided for Q4 revenue of approximately $34.8 billion, falling short of the $35.03 billion estimate.

The stock closed at $367.24 on Wednesday, down 0.66%, before sliding further in extended trading. By Thursday premarket, shares were trading at $355.89, representing a 3.1% drop.

Supply Chain and Deployment Bottlenecks

Tan emphasized that while customers want Broadcom to ship more chips, the company is being conservative with its outlook due to multidimensional supply constraints. He noted that Broadcom expects AI revenue to double to $115 billion in fiscal 2027 and double again to $230 billion in fiscal 2028.

Key bottlenecks identified by management include:

• Land, power, and shell (LPS) availability for data center deployments.
• High-Bandwidth Memory (HBM) constraints, which Broadcom does not supply but customers must secure.
• System memory requirements for AI servers.

Tan stated that these factors dictate the specific timing of capacity deployment. "We have secured supply and we think it’s the right number to put it to 115," Tan said, adding that Broadcom would uplift guidance if circumstances change.

Market Reaction and Technical Setup

Technically, Broadcom faces headwinds. The stock trades 7.7% below its 20-day simple moving average and 7.6% below its 50-day SMA. It is also 10.8% below its 100-day SMA and 3.9% below its 200-day SMA. Although the stock formed a golden cross in April when the 50-day SMA crossed above the 200-day SMA, it has since fallen back below the longer-term level.

Resistance stands near $407.50, while support sits around the psychologically important $350 level. The MACD remains below its signal line with a negative histogram, indicating weakening momentum.

Analyst Views: Strong Results, Soft Outlook

Bernstein analyst Stacy Rasgon described the underlying Q3 results as "very, very good," noting that semiconductor revenue slightly exceeded expectations. Infrastructure software revenue missed estimates, but Rasgon characterized the shortfall as minor.

Gross margin reached 75%, approximately one percentage point above Wall Street’s estimate. However, Rasgon called the Q4 guidance "in-lineish," noting that the operating margin outlook was about 50 basis points below expectations, potentially due to higher memory prices.

Gary Black, Managing Partner at The Future Fund LLC, noted on X that the stock fell nearly 4% premarket after the Q3 beat but soft Q4 guidance. "As the AI Rev strength becomes clearer to investors I expect the stock to recover somewhat," Black wrote.

Analyst Price Target Revisions

Despite the soft guidance, several analysts increased their price targets following the earnings announcement:

Financing and Competition

CEO Hock Tan highlighted financing arrangements with Apollo Global Management (NYSE: APO) and Blackstone Inc. (NYSE: BX) to support key AI customers Anthropic and OpenAI. A $35 billion first tranche has been closed for Anthropic’s initial 1-gigawatt deployment.

Tan stated that only two of Broadcom’s six major AI chip customers need financing. He projected that Anthropic could overtake Alphabet Inc (NASDAQ: GOOGL)’s Google as Broadcom’s largest custom AI chip customer in 2027.

Competition remains a concern, with investors questioning potential loss of business to rivals like MediaTek Inc. Rasgon acknowledged this risk but argued the AI market is large enough to support multiple suppliers, including NVIDIA Corp (NASDAQ: NVDA), Advanced Micro Devices Inc (NASDAQ: AMD), and Qualcomm Inc (NASDAQ: QCOM).

ETF Exposure

Broadcom holds significant weight in major tech and semiconductor ETFs:

• Invesco PHLX Semiconductor ETF (NASDAQ: SOXQ): 9.94%
• iShares Expanded Tech Sector ETF (NYSEARCA: IGM): 8.49%
• iShares Semiconductor ETF (NASDAQ: SOXX): 8.12%
• SPDR S&P 500 ETF Trust (NYSE: SPY): 2.65%
• Invesco QQQ Trust (NASDAQ: QQQ): 2.80%

These large weightings mean flows into or out of these funds can influence the stock price.

What the Numbers Show

The divergence between the strong Q3 operational performance (beating EPS and revenue estimates with expanded gross margins) and the negative market reaction highlights investor sensitivity to forward guidance. While current execution remains robust, the miss on Q4 revenue and operating margin expectations suggests near-term pressure from rising input costs or demand normalization. The market is effectively pricing in a higher bar for future AI growth, requiring management to not only meet but exceed the previously stated $100 billion AI revenue target to restore confidence.