Broadcom (AVGO) is set to report its Q3 earnings after the market close on Wednesday, with the company currently holding a market capitalization of $1.75 trillion, surpassing the valuations of Tesla, SpaceX, Eli Lilly, and JPMorgan, though still trailing behind giants like Nvidia, Google, and Apple [1]. Despite its size, Broadcom's earnings typically attract less attention compared to its larger peers, especially following Nvidia's recent outperformance [1].
The stakes for this earnings report are particularly high due to the disappointing market reaction to Broadcom's previous quarter results, where shares fell nearly 13% the day after earnings and approximately 23% over the following month, largely because the company did not raise its 2027 AI revenue target despite delivering fundamentally solid numbers [1]. This has contributed to a cautious market sentiment, with options prices reflecting elevated implied volatility and a projected move of around 8% by the end of the week [1].
Technically, Broadcom's stock is consolidating just below its 150-day moving average, a level it dropped beneath on August 19 following news of an expanded partnership between Marvell and Google [1]. However, the Commodity Channel Index (CCI) is currently positive, indicating that underlying momentum may be building [1].
Options traders are considering strategies that take advantage of the elevated premiums, such as selling an out-of-the-money cash-covered put about 10% below the recent closing price while also selling an upside call spread, aiming to collect a net credit of at least $7, or more than 1.8% of the current stock price in less than four weeks (over 25% annualized) [1]. The primary risk remains that if management disappoints again on forward AI revenue guidance, a repeat of the Q2 drop could occur, potentially requiring the purchase of shares at a discounted price [1].
CONCLUSION
Broadcom's upcoming Q3 earnings are drawing heightened attention due to recent volatility and cautious market sentiment following last quarter's disappointing guidance. With options pricing in a significant move and technical indicators mixed, traders are positioning for both upside and downside scenarios. The market's reaction will likely hinge on management's AI revenue outlook.