Broadcom's AI Boom Hits a Margin Wall as Memory Costs Squeeze Profits
AVGO sits 20% above its 52-week low of $289.96 on light trading volume (0.3× avg).
Summary
Broadcom's Q3 revenue jumped 86% to $29.6B, beating consensus, and AI chip revenue surged 221% to $16.7B. But the stock fell because gross margin guidance for Q4 is ~73%, down from 78% a year ago—a 410bps compression over two quarters. CFO Amie O'Toole blamed the increasing memory content in custom AI accelerators (XPUs), which dilutes margins. DRAM prices rose 90-95% QoQ in Q1 2026 per TrendForce, and Broadcom is on the paying side. CEO Hock Tan noted supply chain constraints in wafers, substrates, and HBM, and the company is building substrate capacity in Singapore. This follows the Q3 8-K filed yesterday and the earlier Wiseek News item on FY2025 results; today's report adds the margin squeeze and supply chain details. Watch for Q4 earnings on Nov 1 to see if margin compression continues.
At the time of this announcement, AVGO was trading at $348.22 on NASDAQ in the Technology sector, with a market capitalization of approximately $1.7T. The 52-week trading range was $289.96 to $495.00. This news item was assessed with negative market sentiment and an importance score of 8 out of 10. Source: Benzinga.