Why Broadcom (AVGO) Is Down 5.4% After Strong AI Outlook Meets Margin Concerns And What's Next

• Earlier this month, Broadcom reported full-year 2025 sales of US$63.89 billion and net income of US$23.13 billion, raised its quarterly dividend by 10% to US$0.65 per share, and guided for first-quarter 2026 revenue of about US$19.10 billion, implying a 28% increase from the prior-year period.
• The company’s stronger earnings, higher dividend, and AI-driven backlog have coincided with sharp swings in sentiment as investors weigh rapid AI growth against management’s warning about pressure on profit margins.
• Now we’ll examine how Broadcom’s robust AI-guided revenue outlook, alongside emerging margin concerns, reshapes the risk–reward balance in its investment narrative.

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Broadcom Investment Narrative Recap

To own Broadcom, you need to believe its AI-focused chip and infrastructure software strategy can offset customer concentration, competitive pressure, and high leverage. The latest results and Q1 2026 guidance reinforce AI-driven revenue as the key short term catalyst, while management’s warning on margin pressure keeps profitability the central risk to watch, but the new numbers do not fundamentally change that risk profile.

The most relevant recent development here is Broadcom’s guidance for about US$19.10 billion in Q1 2026 revenue, implying 28% year on year growth. That outlook aligns closely with the US$73 billion AI-focused backlog and reinforces AI semiconductors as the core driver behind management’s confidence, even as investors debate how sustained AI mix and custom chip economics will affect future margins.

Yet even as AI orders grow quickly, the concentration of that demand among a handful of hyperscale customers is something investors should be aware of...

Read the full narrative on Broadcom (it's free!)

Broadcom's narrative projects $119.6 billion revenue and $50.8 billion earnings by 2028.

Uncover how Broadcom's forecasts yield a $403.66 fair value, a 19% upside to its current price.

Exploring Other Perspectives

Thirty nine members of the Simply Wall St Community currently see Broadcom’s fair value between US$258.69 and US$480, reflecting very different expectations. As you weigh those views against Broadcom’s AI driven backlog and emerging margin pressures, it can be useful to compare several independent forecasts before forming your own view.

Explore 39 other fair value estimates on Broadcom - why the stock might be worth 24% less than the current price!

Build Your Own Broadcom Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Broadcom research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Broadcom research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Broadcom's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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