Broadcom Earnings Preview

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•  11 Dec 2025
 

•   AMD  
   
  +4.55%
•   AVGO  
   
  +1.85%
•   GOOGL  
   
  -0.87%
•   META  
   
  +0.66%
•   NVDA  
   
  +1.99%

$AVGO prepares to report earnings after the closing bell today. This report matters more than usual. The numbers we see tonight will tell us whether the explosive growth in AI infrastructure is real or just market hype.

AVGO stands at an interesting crossroads. The company is not Nvidia and that might actually be its strength. While everyone watches $NVDA dominate the GPU market with an 80% share, Broadcom has quietly carved out a different path with custom AI chips known as ASICs. These chips are designed specifically for individual clients, built to handle AI workloads at a fraction of the cost of standard GPUs. Where Nvidia charges between 30,000 and 40,000 dollars per chip, Broadcom delivers solutions at around 5,000 dollars. That price difference matters when companies are building data centers that cost billions.

The expectations for tonight are ambitious. Analysts are looking for revenues of 17.5 billion dollars, representing 24% growth compared to last year. But the real story lives inside those numbers. AI chip revenues are expected to jump 66% to reach 6.2 billion dollars for the quarter. That acceleration is what investors are paying for when they push the stock up 76% year to date, far outpacing the Nasdaq's 23% gain.

This growth is not theoretical. Back in September, Broadcom announced a 10-billion-dollar order from a new AI customer for 2026. That single order changed the conversation about the company's future. Management now projects AI revenues could hit 40.4 billion dollars in 2026, more than doubling from current levels. The CEO Hock Tan has built a reputation for conservative guidance, which makes these projections even more compelling.

The relationship with $GOOGL deserves attention. Google's TPU chips, which Broadcom manufactures, account for 58% of the company's ASIC shipments. Each TPU costs around 13,000 dollars, and analysts expect these chips alone to generate 22.1 billion dollars in revenue during 2026. That represents 78% of total ASIC revenues. When Google launched its Gemini 3 AI model recently, built on Broadcom chips, the stock jumped 15% in the weeks following the previous earnings report. The market understands that Broadcom's success is tied directly to the success of its hyperscale customers.

But here is where it gets interesting for traders trying to read the tea leaves. $AVGO operates three main business segments, with semiconductor chips generating 62% of total revenues. Within that chip business, AI now represents roughly 50% of segment revenues. The previous quarter showed AI revenues of 5.2 billion dollars, up 63%, with specialized XPUs used for training AI models contributing 65% of that amount. The company also supplies infrastructure to 70% of the world's largest data centers, giving it a front-row seat to the entire AI buildout.

The report will reveal more than just Broadcom's performance. It serves as a proxy for the health of AI infrastructure spending across the industry. Companies are allocating roughly 200 billion dollars annually toward cloud and AI investments. If Broadcom beats expectations, it signals that this spending is accelerating. If the company disappoints, questions will emerge about whether the AI investment cycle is slowing down sooner than expected.

The stock trades at levels that assume continued strong execution. Analysts at JP Morgan maintain an overweight rating with a $400 price target, while UBS recently raised their target to 472 dollars. The recent launch of Thor Ultra, a new networking chip designed to compete with products from $NVDA and $AMD, shows the company is expanding beyond custom AI chips into broader infrastructure. Partnerships with $META, Alphabet, and OpenAI further diversify the customer base beyond just Google.

There are risks worth considering. Gross profit margins are expected to decline by 70 basis points to 75% this quarter due to higher costs for HBM memory, a critical component in AI chips. Supply chain pressures are real, and they affect pricing power. The company also faces increasing competition. $AMD holds about 10% of the AI chip market and is investing heavily to grow that share. Nvidia, despite its focus on GPUs, is not standing still. The custom ASIC market that Broadcom dominates represents only 20% of the total AI chip opportunity, leaving plenty of room for multiple winners but also multiple competitors.

The decision is not simple. The stock has already run significantly, pricing in much of the good news. A strong report might push it higher, but expectations are elevated. A miss, or even guidance that disappoints, could trigger a sharp pullback given the valuation. The key will be listening to management's commentary about demand visibility for 2026 and beyond. With that 10 billion dollar order already on the books, the focus shifts to whether similar deals are in the pipeline.

At StocksRunner Team we are always trying to separate signal from noise. Tonight's earnings will provide signal. The growth rates, the margin trends, the customer commentary, and the 2026 guidance will all tell us something important about where we are in this cycle. Sometimes the best position is to wait and watch, letting the numbers speak before committing capital. Other times, conviction comes from seeing a company execute quarter after quarter in a market with secular tailwinds. Broadcom has done the latter so far.

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