Broadcom Inc. (AVGO) Stock Analysis: Why AVGO Stock Fell Despite Upbeat Earnings? Is It Still A Good Buy?

Broadcom Inc. (NASDAQ: AVGO) delivered another strong quarterly performance, but investors were not fully satisfied with the forward outlook. Yet AVGO shares sold off after the earnings release, falling as much as 5% before trimming losses in after-hours trading on Septemebr 2. The main concern was not the strength of the latest quarter, but whether Broadcom can continue delivering growth above an exceptionally high market bar.

The core investment question for investors is now shifting from "Is AI demand strong?" to "Can Broadcom continue to exceed increasingly aggressive expectations?" Let's explore its Q3 earnings details and growth potential.

Broadcom Q3 2026 Financial Results: Key Figures Highlight

On 2 September, the chip maker reported revenue of $29.6 billion for the quarter ending 2 August, which was up 86% from the previous year and above the $29.2 billion anticipated by FactSet-tracked analysts. 

Revenue from the Semiconductor Solutions division reached $20.839 billion, surging 127% year-on-year and accounting for 70% of total revenue, while revenue from the Infrastructure Software division reached $8.752 billion (up 29% year-on-year) and accounted for 30%.

In terms of profits, GAAP net income was $13.088 billion, up 216% year-on-year, with diluted earnings per share (EPS) of $2.68 — up 215% from $0.85 in the same period last year. Non-GAAP net income reached $16.372 billion, marking a 95% year-on-year increase, while adjusted EPS stood at $3.32, reflecting a 96% year-on-year increase and surpassing market expectations of $3.24. GAAP operating profit reached $15.955 billion, up 171% year-on-year, while non-GAAP operating profit stood at $20.095 billion, marking a 92% year-on-year increase.

AI Semiconductor Is the Main Growth Engine

The most important number in Broadcom's latest report may be its AI semiconductor revenue. This quarter, revenue from AI semiconductors jumped 221% year on year to $16.7 billion, up 54% from the previous quarter and exceeding market expectations of $15.9 billion. This is mainly due to demand for customised AI accelerators and network chips. CEO Hock Tan stated that demand for custom AI accelerators and networking remains very strong.

Since the end of 2022, the rise of ChatGPT and other generative AI services has seen Broadcom's stock price soar by more than sixfold, pushing the company's market value to around 1.8 trillion US dollars. The AI semiconductor business includes custom AI accelerators and networking products that are increasingly important as hyperscalers build large-scale AI infrastructure.

Broadcom's management maintains a very optimistic outlook for the AI semiconductor business. Market attention is focused on whether the company's future AI revenue can reach a higher scale. Broadcom now expects AI semiconductor revenue to accelerate to $21.7 billion in Q4, representing annual growth of 236%. Additionally, reports suggest that Broadcom's AI semiconductor revenue outlook for fiscal year 2027 could be around 115 billion US dollars, potentially reaching 230 billion US dollars in 2028.

Why AVGO Stock Still Fell After Earnings?

Despite the strong numbers and upbeat guidance, Broadcom's share price fell by up to 5% in after-hours trading before recovering some of the losses following the release of its Q3 financial report.  The reason for this is forward expectations.

Looking ahead to the fourth fiscal quarter, Broadcom is projecting total consolidated revenue of around $34.8 billion. While this reflects a 93% increase on the same period last year, it missed the consensus estimate of $35 billion, with some Wall Street predictions exceeding $37 billion. 

This relatively small discrepancy was enough to trigger selling, as investors had positioned Broadcom as one of the key beneficiaries of the AI infrastructure boom. This suggests that investors may already have priced in exceptional AI growth. With expectations already high, strong results could still prompt investors to take profits if future growth fails to exceed increasingly demanding forecasts.

Is Broadcom Stock Still a Good Buy?

Currently, investors are primarily concerned about whether AVGO stock is a good investment. Despite the decline in the stock price following the earnings report, this does not indicate deteriorating fundamentals. In fact, it indicates accelerating AI demand, substantial operating leverage and exceptional cash generation.

Moreover, the AI growth trajectory for Broadcom remains intact. A projected increase in quarterly AI semiconductor revenue from $16.7 billion to $21.7 billion would represent a significant improvement and is the strongest argument for a long-term bull case for AVGO.

However, despite the strong AI numbers, investors should not ignore competitive risks. The custom AI accelerator market is attracting increasing competition. The company is facing intensifying market rivalries. Competitors in the custom design sector, including Marvell Technology Inc. (MRVL) and MediaTek Inc. are expanding their partnerships with major cloud providers, creating a challenging environment in which to sustain hyper-growth.

Overall, Broadcom still looks fundamentally strong, but being a "good company" does not automatically make it a "good stock at any price". Investors should evaluate AVGO based on its growth rate, forward earnings expectations, and competitive risks, rather than focusing solely on the latest earnings beat.

The next major catalyst will be whether Broadcom can convert its ambitious AI revenue targets into consistent quarterly performance. Investors should pay particular attention to AI semiconductor revenue, custom ASIC customer wins, networking demand, gross margins, and the company's outlook for fiscal year 2027.

FAQs

1. How did Broadcom perform in Q3 FY2026?

Broadcom reported $29.6 billion in revenue, up 86% year over year and above analysts’ $29.2 billion estimate. Adjusted EPS reached $3.32, also exceeding expectations.

2. What was Broadcom’s Semiconductor Solutions revenue?

Semiconductor Solutions revenue reached $20.839 billion, representing a 127% year-over-year increase. The segment accounted for approximately 70% of total revenue, up from 57% a year earlier.

3. How much did Broadcom’s Infrastructure Software revenue grow?

Infrastructure Software revenue was $8.752 billion, an increase of 29% year over year, representing approximately 30% of Broadcom’s total quarterly revenue.

4. What was Broadcom’s Q3 net income?

Broadcom reported GAAP net income of $13.088 billion, up 216% year over year. Non-GAAP net income increased 95% to $16.372 billion.

5. What was Broadcom’s adjusted EPS in Q3?

Broadcom’s adjusted EPS was $3.32, up 96% year over year and above the approximately $3.22–$3.24 analyst estimates cited in market reports.

6. How strong was Broadcom’s free cash flow?

Broadcom generated $13.665 billion in free cash flow, up 95% year over year. Free cash flow represented approximately 46% of quarterly revenue, highlighting the company’s strong cash-generation capability.

7. What drove Broadcom’s Q3 growth?

The primary growth driver was the Semiconductor Solutions business, supported by strong demand for AI accelerators, custom AI chips, networking products, and data-center infrastructure. The segment’s revenue increased 127% year over year.

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