Broadcom falls on soft fourth-quarter revenue outlook

Broadcom Inc. (NASDAQ: AVGO ) stock fell more than 3% in Thursday’s premarket trading.

Investors focused on the company’s soft outlook.

Nasdaq futures were little changed while S&P 500 futures have gained 0.08%.

The company reported fiscal third-quarter revenue of $29.59 billion after Wednesday’s close.

That beat the $29.36 billion estimate.

Adjusted earnings of $3.32 per share also topped the $3.24 estimate.

However, Broadcom forecast fourth-quarter revenue of about $34.8 billion.

That fell short of the $35.03 billion consensus estimate.

Bernstein Calls Broadcom’s Quarter Strong Broadcom entered the report with high expectations tied to artificial intelligence demand.

The stock’s weak technical setup also added pressure.

Recent rebounds have struggled to hold as shares remain below key moving averages.

However, Bernstein analyst Stacy Rasgon said the underlying results remained strong. "The quarter was actually very, very good," Rasgon told CNBC on Wednesday.

Rasgon said Broadcom delivered an overall beat, while semiconductor revenue came in slightly above expectations.

Infrastructure software revenue missed estimates, but he described the shortfall as minor.

Gross margin reached 75%, about 1 percentage point above Wall Street’s estimate.

Broadcom also posted strong artificial intelligence revenue.

Investors Await 2027 AI Outlook Rasgon called Broadcom’s fourth-quarter guidance "in-lineish." He said the operating margin outlook was about 50 basis points below expectations, possibly because of higher memory prices.

However, Rasgon said the earnings call would carry more weight than the initial report.

Investors are looking for an update on Broadcom’s AI semiconductor revenue outlook for 2027.

The company previously projected more than $100 billion in AI semiconductor revenue.

Rasgon said investors widely expect Broadcom to raise that forecast.

He also wants management to provide more insight into 2028 demand.

Broadcom has discussed financing arrangements with Apollo Global Management Inc. (NYSE: APO ) and Blackstone Inc. (NYSE: BX ).

Those efforts could fund significant data center capacity through 2028, Rasgon said.

Custom Chip Competition Remains a Concern Investors have also questioned whether Broadcom could lose custom chip business to rivals such as MediaTek Inc. and other semiconductor companies.

Rasgon acknowledged the competitive risk but said the AI market could be large enough to support several suppliers.

Broadcom, MediaTek, NVIDIA Corp. (NASDAQ: NVDA ), Advanced Micro Devices Inc. (NASDAQ: AMD ) and Qualcomm Inc. (NASDAQ: QCOM ) have all pointed to strong demand, he added.

Rasgon said Broadcom’s valuation has fallen alongside other chip stocks.

Still, management’s long-term AI outlook could determine whether investors buy into the stock’s next leg of growth.

Technical Analysis Broadcom traded 7.7% below its 20-day simple moving average.

It was also 7.6% below its 50-day SMA, 10.8% below its 100-day SMA and 3.9% below its 200-day SMA.

This setup suggests that rallies could face selling pressure.

Several moving averages also cluster in the mid-to-high $300 range.

Meanwhile, the MACD remains below its signal line, and the histogram is negative.

These signals point to weakening momentum.

The longer-term picture is mixed.