Broadcom posts strong AI revenue, issues margin warning, shares fall

Broadcom, the chipmaker based in Palo Alto, California, reported fiscal fourth quarter revenue of $18.02 billion and adjusted earnings per share of $1.95, beating consensus estimates and reflecting a sharp jump in AI related business. The company said AI semiconductor revenue rose 74 percent year over year in the October quarter, and one report cited Q4 AI revenue of roughly $6.5 billion. Broadcom also told investors it expected AI semiconductor revenue to double in the ongoing quarter and that its AI networking unit had an order backlog for AI switches exceeding $10 billion.

Despite top line strength, management warned that the rising share of AI related system and infrastructure sales would weigh on gross margins. Broadcom projected first quarter revenue above Wall Street estimates with a company guide of $19.1 billion against a reported Street estimate of $18.48 billion, but said gross margins could narrow by about 100 basis points next quarter due to the AI mix. That combination of a bullish revenue outlook and a cautionary margin signal produced a mixed market reaction.

In U.S. after hours trading following the Dec. 11 release, shares initially climbed more than 2 percent before sliding as much as about 5 percent. Trading in Frankfurt on Dec. 12 reflected similar volatility, with reports of a roughly 4.7 percent decline. Another aftermarket data point on Dec. 12 put the stock at $404.96, down 1.94 percent. Market commentators and analysts said part of the weakness reflected profit taking after a strong 2025 run, technical selling, and concern that margin pressure and demand uncertainty could limit near term upside.

Analyst coverage, however, remains broadly positive. A market technical report noted that 93.6 percent of analysts rate Broadcom as Buy or Strong Buy, and the company entered the quarter having delivered four consecutive earnings beats that averaged 2.64 percent above estimates. Polymarket traders assigned about 68 percent odds that the stock would rise after the report, signaling continued investor interest in the AI growth story even as some market participants pared positions.

Broader investor worries center on two interlocking risks. One is that a higher mix of AI system sales and packaged components can compress gross margins relative to pure chip shipments. The other is supply chain strain in advanced packaging and potential macroeconomic softness that could slow demand in non AI segments, which stayed flat sequentially in the quarter. Analysts also noted Broadcom has been aggressively expanding into AI infrastructure and benefits from large hyperscaler customers, with one report identifying Google as the companys top customer.

The results highlight a recurring theme across the semiconductor industry this year. Rapid adoption of generative AI has created lucrative, fast growing markets but also driven companies to sell more complex, higher cost systems and services. For Broadcom, the immediate test will be whether the projected revenue acceleration from AI can outweigh margin compression and sustain investor confidence through 2026.