Broadcom Stock Falls Despite Q4 Earnings Beat; Here’s Why AVGO Dropped

It was a narrative twist few expected in a season dominated by solid tech earnings. On December 11, 2025, Broadcom (Nasdaq: AVGO) reported record Q4 fiscal 2025 results, beating both revenue and earnings expectations. Yet, despite this strong showing, with top and bottom-line surprises and upbeat commentary on AI demand, the AVGO stock, while immediately went up around 3% after the release, later slid notably in after-hours trading by 4.47% as per Google Finance. Investors were left pondering a critical question: how can a company that beat expectations still see its share price fall?

Let’s break down with this blog what drove Broadcom’s earnings reaction, the numbers behind the headlines, and what this means for AVGO going into 2026.

Earnings Snapshot: Broadcom Q4 FY25

Source: Broadcom’s Earnings Release

Broadcom’s revenue of $18.015 billion comfortably beat prior consensus estimates of around $17.45-17.50 billion, showing demand remains strong across semiconductors and enterprise software. Adjusted earnings per share came in at $1.95, above the expectation of $1.87. AI chip and semiconductor demand, especially from hyperscalers, was the standout driver, with that segment rising by well over 70% YoY.

Broadcom also closed out FY25 with a strong full-year performance, supported by the same AI and software tailwinds that powered its final quarter. The company reported full-year revenue of about $63.9 billion, reflecting healthy demand across both semiconductors and infrastructure software. Full-year net income and free cash flow rose sharply, helped by scaling AI programs, rising subscription software revenue and disciplined cost management. Management noted that FY25 marked a significant step in reshaping Broadcom into a more diversified AI-infrastructure and software-driven business, setting the tone for its outlook heading into fiscal 2026.

To truly understand Broadcom’s long-term positioning and why its AI and software strategies matter so much in this earnings cycle, check out our deep-dive explanation of the company’s journey and business model in “The Broadcom Story Explained.”

So Why Did the AVGO Stock Fall?

Even with solid numbers on the board, Broadcom’s stock didn’t hold up. The shares initially went up by around 3% but then slipped about 4.47% in after-hours trading, and the reaction had less to do with the headline beat and more to do with what investors read between the lines.

1. Profit-Taking After a Stellar Run

AVGO has climbed sharply through 2025, far ahead of many tech peers. When a stock has run that far, traders often lock in gains the moment results are out, no matter how strong the update looks.

2. Margin Concerns Amid AI Revenue Mix

Broadcom’s AI business is expanding fast, but several analysts pointed out that custom silicon and AI systems don’t always carry the same margins as some of the company’s older product lines. Management’s own comments about pressure on gross margins in the coming quarter added to the hesitation.

3. Guidance and Long-Term Profitability Questions

The company talked about Q1 FY26 revenue landing near $19.1 billion and reiterated that AI revenue could double. But what wasn’t fully clear was how quickly margins would improve alongside that growth. For institutional investors who model profitability years out, that uncertainty matters.

4. Broader Market Sentiment on AI Stocks

Other AI-focused companies, including Oracle, reported softer numbers this week, and that stirred a broader debate about whether the AI trade had become stretched. That shift in mood rippled across the sector, and Broadcom was caught in that drift just like NVIDIA and a few others.

What CEO Comments Told Investors

On the call, CEO Hock Tan underscored the strength of Broadcom’s AI semiconductor business, noting that demand for custom accelerators and Ethernet AI switches remained firm. He pointed out that the company was entering the new fiscal year with a strong pipeline and confidence in how its AI offerings are scaling.

At the same time, Tan didn’t ignore the challenges. He acknowledged the pressure on margins and the fact that hyperscalers are increasingly building highly tailored solutions, a competitive landscape that requires continuous investment and agility. The tone wasn’t negative, but it wasn’t overly celebratory either. It reflected a company that knows it is growing quickly, yet still has to navigate the realities of a fast-moving market.

What Analysts Are Watching Now with Broadcom?

With this earnings cycle behind us, key focus areas for analysts and investors include:

• AI Revenue Trajectory: Can the doubling of AI chip revenue continue as forecast? The next few quarters will be crucial.
• Margin Dynamics: As AI solutions scale, will profitability rates improve or remain pressured?
• Customer Diversification: Dependence on a few large hyperscale orders can be risky; diversification signals matter.
• Long-Term Guidance: Future guidance will shape whether Broadcom can sustain premium valuation multiples.

Overall, most analysts reaffirm strong medium-term growth expectations for AVGO, while noting that valuation could reset if margins lag or guidance disappoints.

Final Thoughts

Broadcom’s latest earnings illustrate a broader truth in markets: strong numbers don’t always guarantee straightforward stock reactions. In a world where growth, margins, guidance and sentiment all interplay, investors price forward-looking expectations and even impressive results can disappoint if parts of the narrative feel incomplete.

For Broadcom (AVGO), this episode could well be more about where investors see the story going in 2026 than the headline Q4 results themselves. As markets digest today’s reaction, long-term believers may view the dip as a buying opportunity, but only if future earnings and guidance confirm the growth trajectories Broadcom has laid out.

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