Broadcom shares dip despite strong Q3 earnings report

Broadcom Inc. reported strong third-quarter earnings, with revenue reaching $13.072 billion, surpassing analyst expectations of $12.96 billion and marking a 42% increase year-over-year. Earnings per share also exceeded forecasts, coming in at $1.24 compared to the anticipated $1.20. The growth was primarily driven by robust demand for the company's AI semiconductor solutions, which saw a quarter-over-quarter increase of 3%-4%. Additionally, Broadcom's non-AI semiconductor segment is projected to grow by 10% in the upcoming quarter. The acquisition of VMware has further bolstered Broadcom's performance, with infrastructure software revenue soaring by 41% in the third quarter. Despite these positive developments, some analysts expressed concerns regarding the company's guidance, suggesting it could have been more aggressive given the current market uncertainties. Major firms like Benchmark, Goldman Sachs, and Morgan Stanley have maintained their Buy or Overweight ratings on the stock. Following the earnings release, Broadcom shares experienced a significant selloff, dropping as much as 9.4% in premarket trading and closing down by 9.7% at $138.00. This reaction was unexpected, considering the company's strong financial results and optimistic outlook for the fourth quarter, where revenue is anticipated to reach approximately $14 billion. Broadcom's management remains focused on achieving a strong finish to the year, with adjusted EBITDA expected to be around 64% of projected revenue. Analysts, including JPMorgan's Harlan Sur, have raised the stock's price target to $210 by December 2025, reflecting confidence in Broadcom's diversified growth drivers despite the recent market reaction.