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Broadcom (AVGO -11%) is trading sharply lower today despite posting an impressive finish to FY25. The semiconductor and infrastructure software giant delivered upside Q4 (Oct) results, issued Q1 (Jan) revenue guidance above consensus, and even raised its dividend by 10%. The problem: expectations were sky-high, with the stock up over +180% since April, leaving little room for merely "strong" results.

• Semiconductor Solutions segment (61% of Q4 revenue) posted Q4 revenue of $11.1 bln, up 35% yr/yr, an acceleration from prior quarters. AI semiconductor revenue: $6.5 bln, up 74% yr/yr. Custom accelerator revenue more than doubled yr/yr as customers increasingly adopt XPUs to train LLMs and scale monetization platforms.
• Q1 outlook: Semiconductor segment revenue: $12.3 bln, up 50% yr/yr. AI semiconductor revenue: $8.2 bln, up 100% yr/yr, driven by custom AI accelerators and Ethernet AI switches.
• Infrastructure Software segment (39% of Q4 revenue) posted Q4 revenue of $6.9 bln, up 19% yr/yr. Bookings strength continued: $10.4 bln in total contract value vs $8.2 bln last year.
• FY26 Commentary: No detailed guidance, but directionally: AI revenue expected to accelerate and remain the primary growth driver. Non-AI semiconductor revenue stable. Infrastructure software to grow low-double digits, led by VMware.
• Why Is the Stock Down? Despite a fundamentally strong quarter, AVGO had been priced to perfection, surging over +180% from its April lows. While results and commentary were solid, the FY26 tone wasn't quite as hyper-bullish as the market hoped, particularly given the massive AI backlog and recent enthusiasm around AI accelerators and networking.

Briefing.com Analyst Insight

Broadcom's Q4 and Q1 guide check all the bullish boxes—accelerating AI semiconductor growth, exceptional networking demand, and continued VMware-driven software strength. But this is precisely the problem: the stock had already priced in an almost flawless AI upcycle. Investors wanted upside not only to Q4 and Q1, but also a more aggressive long-term AI growth outlook. While AVGO remains one of the best pure-play AI infrastructure winners, its parabolic run has pushed valuation to levels where even very strong results may not be enough. Until expectations reset, the risk/reward skews less favorably, despite Broadcom's enviable AI positioning and industry-leading backlog.