Broadcom Stock Plunges Despite Strong Earnings: What's Going On?

Broadcom Inc. (AVGO) shares took a nosedive today, despite reporting better-than-expected earnings and revenue for the fourth quarter and fiscal year 2024. The stock price fell by 3.5% in extended trading, raising questions about the factors contributing to this drop. This article explores the reasons behind Broadcom's stock price decline and the broader market sentiment that may have influenced investor behavior.



1. Earnings and Revenue Misses: Although Broadcom's earnings per share (EPS) of $1.42 and revenue of $14.05 billion beat analyst estimates of $1.38 and $14.09 billion, respectively, the company's guidance for the first quarter of fiscal year 2025 fell short of expectations. Broadcom projected revenue of approximately $14.6 billion, compared to the average analyst estimate of $14.8 billion. Additionally, the company's adjusted EBITDA guidance of approximately 66% of projected revenue was lower than the 67% reported in the fourth quarter of fiscal year 2024. These misses may have contributed to investor disappointment and the subsequent stock price decline (Source: Article).
2. Market Sentiment and Sector Trends: Broadcom's stock price decline can also be attributed to broader market sentiment and sector-wide trends. The broader market was negative on the day, with the S&P 500 index falling by 1.2%. The semiconductor sector has been under pressure recently, with the Philadelphia Semiconductor Index (SOX) down by 3.5% on the day. Broadcom's stock price decline can be seen as a reflection of these broader market and sector trends, rather than a reaction to the company's earnings report (Source: Article).
3. Analyst Opinions and Recommendations: Despite the overwhelmingly positive sentiment from analysts, with 38 analysts providing opinions and a strong buy recommendation from 8, buy from 29, hold from 6, and no sell or strong sell recommendations, the stock price sagged today. This suggests that market sentiment may be influenced by other factors, such as earnings reports or geopolitical events (Source: Article).



In conclusion, Broadcom's stock price decline today can be attributed to a combination of earnings and revenue misses, broader market sentiment, and sector-wide trends. While the company's fundamentals remain solid, with strong adjusted EBITDA margin and free cash flow, investors may have been disappointed by the guidance for the first quarter of fiscal year 2025. As the market continues to evolve, investors should remain vigilant and adapt their strategies to capitalize on emerging opportunities and mitigate risks.

Shares of semiconductor company Broadcom (AVGO -2.24%) were tumbling today after it was reported that the company is testing out Intel's manufacturing chip process. Broadcom designs its chips, but doesn't manufacture them. Most of the company's processors are currently made by Taiwan Semiconductor Manufacturing (TSMC). Broadcom investors evidently don't like the idea of the company potentially using Intel as its manufacturer, and sent the stock down by as much as 4.2% today. Broadcom's shares fell by 2.2% as of 11:25 a.m. ET.

Testing out a potential manufacturer It's not uncommon for chip designers to occasionally run tests with chip manufacturers to see if their process could be beneficial. But Broadcom's test of Intel's 18A process caught investors' attention, likely because Intel has struggled to get its particular advanced processing production off the ground. Intel delayed its potential manufacturing contracts for its 18A process until 2026, and recent reporting from Reuters shows that the timeline has been pushed back an additional six months. The 18A process is for making advanced artificial intelligence (AI) chips, which is the bread and butter of Taiwan Semiconductor's manufacturing. Broadcom investors may be concerned that if the company moves some of its chip manufacturing to Intel, it could slow down production or delay the release of new processors.

Nothing is set in stone yet Neither company made comments about a partnership or new deals, and no official contracts have been announced. That means Broadcom investors should take a wait-and-see approach to this news and not make any investment decisions based on preliminary testing. Even if the company decided to move some of its chip manufacturing to Intel, it's unlikely it would make a drastic transition at a time when Intel is still trying to find its footing amid production slowdowns. Broadcom is most likely trying to figure out what manufacturing options it has available and how well Intel's 18A process has developed.