Broadcom Earnings Preview: Eyes on TPU Ramp and a New ASIC Client

Ahead of Thursday's post-market earnings report, Broadcom options activity signals a heightened state of alert as Implied Volatility has surged to 51.44% and currently trades at a premium to Historical Volatility with an IV Percentile of 62%.

This elevated pricing structure is supported by a substantial Total Open Interest of 2.13 million contracts and suggests that market participants are pricing in a significant move following the release. Despite the anticipation of volatility, the Put/Call Ratio of 1.04 reflects a cautious rather than euphoric sentiment indicating that investors are actively utilizing protective strategies to hedge downside risk rather than committing to aggressive directional bets.

– Revenue: The market consensus for Q4 revenue is $17.47 billion, representing a 24% year-over-year increase and a 10% quarter-over-quarter increase. Previous guidance was $17.4 billion.

– Margins: The consensus for Q4 GAAP gross margin is 67.5%, up 3.4 percentage points year-over-year and 0.4 percentage points quarter-over-quarter. The consensus for GAAP operating margin is 41.5%, an increase of 8.6 percentage points year-over-year and 4.6 percentage points quarter-over-quarter. The Non-GAAP operating margin consensus is 65.3%, up 2.6 percentage points year-over-year but down 0.2 percentage points quarter-over-quarter.

– Net Income: The consensus for Q4 GAAP net income is $5.48 billion, swinging to a profit year-over-year and rising 32% quarter-over-quarter. The consensus for Non-GAAP net income is $9.26 billion, up 51% year-over-year and 10% quarter-over-quarter.

The recent surge in interest surrounding Google's TPUv7 has reignited market enthusiasm for the ASIC sector. As Google's core partner for TPUs, Broadcom stands at the forefront of this trend. Last quarter, the ASIC business revenue mix accelerated to 65%, with the remainder coming from optics and networking.

In the previous quarter, Broadcom noted that beyond its three existing ASIC clients, it received a $10 billion major order from a fourth client (highly likely involving the direct sale of Google TPUs to Anthropic). This order is expected to be delivered in the third quarter of fiscal 2026, leading to a significant upward revision in the FY26 AI revenue outlook, with year-over-year growth expected to exceed 60%.

Furthermore, Broadcom mentioned last quarter that its total order backlog has reached $110 billion. At least 50% of this comprises semiconductor business, within which AI accounts for a higher proportion than non-AI. The growth trend for 2026 is projected to surpass that of 2025, implying year-over-year growth above 60%. Unlike Nvidia, Broadcom has stated that its XPU business will not involve the enterprise market, focusing exclusively on the top-tier Large Language Model (LLM) market.

Broadcom's non-AI semiconductor business remained relatively soft last quarter, with revenue around $4 billion and only slight year-over-year growth. The only segment showing a sustained strong uptrend was the broadband business (which was the most severely impacted during the demand decline of 2024 and early 2025). Conversely, enterprise networking and server storage declined quarter-over-quarter, while wireless and industrial businesses remained flat.

Management has stated that, from a cyclical perspective, no other business is currently maintaining an upward trend. The recovery in non-AI semiconductors is indeed slow and meaningful recovery may not be visible until the mid-to-late stages of 2026 (end of FY26). Based on current guidance, non-AI semiconductor revenue for this quarter is expected to be flat year-over-year, ending the trend of continuous decline.

As the world's second-largest AI chip company, Broadcom possesses sufficient growth headroom in both ASICs and GPUs against a backdrop of severe shortages in AI computing power. The market's core focus remains on the rapid growth of its AI business and the potential for high-growth future guidance. Specifically, this translates to watching the pace of volume expansion for ASIC clients and the progress of the non-AI business recovery.

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