avgo stock plummets 5% after-hours despite strong Q4 earnings as CEO's AI remarks spark margin concerns

Broadcom Inc. (AVGO) shares fell nearly 5% in after-hours trading following the company's fiscal 2025 fourth-quarter earnings report, despite strong financial results and guidance. The decline was attributed to investor concerns over potential long-term risks in the AI market and a misinterpretation of CEO Hock Tan's comments during the earnings call. The stock had initially surged over 3% after the report but reversed lower as analysts and traders grappled with [Tan's remarks on customer tooling and margin pressures](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/).

Earnings and Guidance Exceed Expectations

Broadcom reported revenue of $18.02 billion for the quarter, surpassing the $17.49 billion consensus estimate, with [adjusted earnings per share of $1.95](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/), ahead of the $1.86 expected. The Semiconductor Solutions segment, which accounts for the majority of revenue, grew 34.5% year-over-year to $11.07 billion, [driven by a 74% increase in AI semiconductor revenue to $6.5 billion](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/).

The Infrastructure Software segment also outperformed, [reporting $6.9 billion in revenue](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/), up 19% year-over-year.

The company raised its fiscal 2026 first-quarter revenue guidance to $19.1 billion, exceeding the $18.27 billion consensus. [AI semiconductor revenue is projected to double year-over-year](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/) to $8.2 billion, reflecting strong demand for custom accelerators and networking components. [Adjusted EBITDA is expected to reach $12.78 billion](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/), with a 67% margin, above the 66% consensus.

Investor Concerns Over AI Market Dynamics

The stock's post-earnings decline stemmed from a perceived ambiguity in Tan's remarks during the Q&A session. When asked about the risk of AI customers developing in-house hardware, Tan dismissed the idea as an "overblown hypothesis," [noting that the rapid evolution of technology](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/) and competition from GPU providers like Nvidia (NVDA) would keep customers reliant on third-party solutions. However, [investors interpreted this as a lack of confidence](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/) in long-term customer loyalty, sparking fears of margin erosion.

[CFO Kirsten Spears added to the unease](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/) by acknowledging that increased shipments of AI systems in the second half of 2026 could lead to lower gross margins due to higher component costs. This raised questions about the sustainability of Broadcom's profit margins in an increasingly competitive market.

Strategic Positioning in the AI Ecosystem

Broadcom's AI-related backlog now exceeds $73 billion, with $53 billion attributed to XPU (custom chip) orders. Notable contracts include a $10 billion and $11 billion order from Anthropic, and [a $1 billion deal with an unnamed customer](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/), all slated for delivery in late 2026. The company's Ironwood XPUs, used by Google for its Gemini 3 model, are also being adopted by Apple, Cohere, and SSI, [reinforcing its role in the AI supply chain](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/).

Tan emphasized that the company's focus on purpose-built hardware provides a competitive edge against "merchant GPUs" from rivals. However, the CEO acknowledged the need to balance growth with margin discipline as the AI market matures.

Broader Industry Context and Competitive Risks

[Stephen Witt, author of The Thinking Machine](https://finance.yahoo.com/news/if-google-wins-ai-race-nvidia-is-in-trouble-says-author-of-jensen-huang-biography-184624884.html), noted that Google's Gemini model—trained entirely on its own TPUs—poses a significant threat to Nvidia's dominance. If Google can sustain AI leadership using its in-house chips, [it could set a precedent](https://finance.yahoo.com/news/if-google-wins-ai-race-nvidia-is-in-trouble-says-author-of-jensen-huang-biography-184624884.html) for other tech giants to follow, potentially undermining Broadcom's market position.

Google's recent launch of AI-powered article overviews on its News platform also signals a strategic push into content summarization, [which could influence how AI-driven data is processed](https://techcrunch.com/2025/12/10/google-is-testing-ai-powered-article-overviews-on-select-publications-google-news-pages/) and monetized. This initiative, part of a pilot with major publishers, includes direct payments to offset potential traffic losses.

Stock Valuation and Strategic Outlook

Despite the post-earnings selloff, Broadcom's shares remain up 75% year-to-date, trading near record highs. Analysts argue that the stock's long-term potential is tied to its AI-driven revenue growth and margin resilience. The CEO's personal stake in AI revenue targets—610,521 shares if $90 billion is reached by 2030—further aligns executive incentives with strategic objectives. The company's ability to navigate margin pressures and maintain customer relationships will be critical in 2026. While the current selloff reflects short-term caution, [the fundamentals suggest continued growth](https://techcrunch.com/2025/12/10/broadcom-shares-slide-after-investors-seek-bigger-ai-payoff/) in both semiconductor and software segments, supported by robust AI demand and infrastructure expansion.