Broadcom Earnings: Can the Stock Break Yearly Lows?

An 8% stock price move is projected for the chipmaker

• Broadcom will report quarterly earnings after the market closes Thursday.
• The company missed revenue estimates last quarter, and the expectations are even higher this time around.
• Its stock is trading near the low of 2025.
• The AI chipmaker is expected to report earnings-per-share of $1.51 on $14.59 billion in revenue.
  

Broadcom (AVGO) is set to report quarterly earnings on Thursday after the market closes, and AI stocks have suffered recently with the sweeping sell-off across many asset classes. In a historic two-day rally in mid-December of last year, the price skyrocketed from $180 to $250 per share but has fallen back to $186 per share.

As a global player in semiconductor and infrastructure software, Broadcom was hit hard with news of uncertainty in AI and tech. That’s in line with the sell-off seen with other AI names, like Advanced Micro Devices (AMD) and NVIDIA (NVDA) to name just two.

Broadcom is expected to report earnings-per-share (EPS) of $1.51 on $14.59 billion in revenue. Both estimates are higher than last quarter, when Broadcom failed to exceed revenue estimates.

With that said, Broadcom did report strong numbers in the previous earnings call. Hock Tan, president and CEO of Broadcom, offered positive sentiment: “Broadcom's fiscal year 2024 revenue grew 44% year-over-year to a record $51.6 billion, as infrastructure software revenue grew to $21.5 billion on the successful integration of VMware.”

“Semiconductor revenue,” Tan continued, “was a record $30.1 billion, driven by AI revenue of $12.2 billion. AI revenue, which grew 220% year-on-year, was driven by our leading AI XPUs and Ethernet networking portfolio."

These are massive numbers, but there's still a lot of uncertainty priced into this week's earnings call. We can look at the implied volatility of the options market for context around what the market expects from Broadcom earnings, and right now we're seeing an 8% stock price move expectation.

Broadcom is currently trading at $188, and the expected stock price range for this week is +/- $17.15. With most company earnings, we see an expected range between 5%-10% of the notional value of the stock price. Broadcom comes in at 8%, which puts it on the higher end of the range of most equities.

Looking further out in time, we see a +/- $31.93 expected move through the May expiration cycle. That means this week's earnings report accounts for over 53% of the implied stock price range over the next 74 days. Even though they're posting plenty of strong numbers, the market is telling us that uncertainty is still apparent.

Bullish on AVGO stock for earnings

If you're bullish on AVGO stock for earnings, you're looking for another big EPS and revenue result on Thursday. If they can beat EPS and revenue estimates and sprinkle in growth possibilities for the rest of the year, we could see the stock begin to recover from recent lows.

Bearish on AVGO stock for earnings

AVGO bears have some interesting angles to pursue this week, and it doesn't necessarily have to do with the earnings report at all. Yes, we could certainly see the company’s stock drop if EPS and revenue numbers are missed, or if tariff talk issues arise, but the overall stock market has seen real volatility in recent weeks. The NASDAQ is down 2,000 points from recent highs, and investors may be skittish to open new bullish positions on a chip stock not named NVIDIA (NVDA). High implied volatility surrounding the earnings announcement also tells us there is an unknown element to this earnings call, and that's not necessarily a good thing.

Either way you look at it, we should expect to continue to see large market moves leading up to and after the earnings announcements this week. Tune in to Options Trading Concepts Live at 11 a.m. CST on Thursday ahead of Broadcom earnings for an in-depth look at options trading strategies.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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