Broadcom (NASDAQ:AVGO) heads into its fiscal third-quarter earnings report with options traders bracing for a significant move. Implied volatility suggests a post-earnings swing of roughly 7%, which, with the stock trading near $369, translates to a potential range of about $400 on the upside or below $343 on the downside.
The stock has retreated approximately 25% from its June peak, even as Wall Street consensus calls for revenue near $29.4 billion and adjusted earnings of about $3.24 per share. The company's own guidance pointed to that revenue figure, which would represent an 84% year-over-year surge, while adjusted EPS is expected to nearly double.
High bar already set
The challenge for Broadcom is that strong results are largely priced in. The company's previous earnings report demonstrated why expectations have become so demanding: despite delivering solid numbers, the shares fell sharply the next session as investors focused on unchanged long-term AI guidance and the absence of a larger upside surprise.
Benchmark analyst Cody Acree sees the recent pullback as creating a "better tactical setup" ahead of the print, according to TipRanks. Acree models revenue of $29.4 billion and EPS of $3.24, maintaining a Buy rating with a $545 price target. However, the market's focus is likely to be on forward guidance. A modest beat may not be sufficient to push shares toward $400 unless management provides stronger evidence that AI revenue is accelerating.
Google concerns weigh
Competition around Alphabet's Google has become a major investor worry. Google has expanded custom-chip work with Marvell Technology while continuing to use other silicon partners, raising questions about Broadcom's long-standing role in the TPU program.
JPMorgan analyst Harlan Sur believes those fears are "overstated," according to MarketWatch. Sur maintains an Overweight rating and $580 target, arguing that recent channel checks suggest Google is adding partners rather than displacing Broadcom. UBS analyst Timothy Arcuri has reached a similar conclusion, noting he does not see Marvell "cannibalizing AVGO's share or opportunity" at Google and expects Broadcom to emphasize it remains Google's "plan of record." Still, Arcuri trimmed his fiscal 2027 AI revenue estimate by about $5 billion to roughly $130 billion and lowered his price target to $470 from $485.
The $100 billion AI promise
Broadcom has previously outlined a path to more than $100 billion in fiscal 2027 AI revenue, but investors want more detail on how quickly that target will convert into quarterly sales. Jefferies analyst Blayne Curtis expects Broadcom to remain dominant in Google's TPU supply chain, while cautioning that exceeding already elevated AI expectations could become more difficult.
JPMorgan's Sur expects fiscal 2026 AI revenue to exceed $56 billion, while UBS sees roughly $130 billion in fiscal 2027. That divergence underscores why the options market is pricing an expectations event rather than a routine earnings report.
For a move toward $400, investors will likely need strong fourth-quarter AI guidance, confidence in the fiscal 2027 target, and reassurance on Google. A drop below $343 may require less: a cautious outlook, slower customer ramps, or another quarter that merely meets lofty expectations could be enough to trigger selling.
As the AI trade faces a pivotal week, Broadcom's report will be a key test for the sector. Related coverage includes the broader AI trade outlook and Broadcom's technical support levels.
This article is for informational purposes only and does not constitute financial advice.
