AVGO Hits Mark, Guidance "More Vague" Than Investors Hoped For

Core Viewpoint - Broadcom's stock is experiencing a significant decline of over 10% following its earnings report, despite a strong performance in 2025, where it gained more than 55% year-to-date and over 160% since April's low due to tariffs [1][4]. Financial Performance - Broadcom reported fiscal fourth-quarter sales of $18 billion, exceeding expectations, and earnings per share rose to $1.95, beating the anticipated $1.87 [9]. - The company increased its quarterly dividend by 10% to 65 cents per share [9]. Market Reaction - The stock's decline is attributed to a sales outlook that fell short of high market expectations, leading to the largest intraday drop in about eight months [4]. - CEO Hawk Tan's cautious commentary during the earnings call raised concerns among investors, particularly regarding the company's AI product backlog of $73 billion, which is expected to be shipped over the next six quarters [5][8]. AI Revenue Outlook - Investors were looking for clarity on AI revenue forecasts, but the company did not provide specific guidance for 2026, describing it as a "moving target" [7][8]. - There are concerns about tightening profit margins due to AI product sales, despite a significant order of $11 billion from Anthropic disclosed by the CEO [8]. Analyst Sentiment - Despite the stock's decline, analysts remain optimistic, with several raising their price targets significantly, indicating continued confidence in Broadcom's growth potential, particularly in the AI sector [10][12]. - Analysts predict that the AI business could see a year-over-year growth of approximately 100% in the January 2026 quarter [11].