Broadcom Inc. (AVGO) Down 14% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Broadcom Inc. (AVGO). Shares have lost about 14% in that time frame, underperforming the S&P 500.But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Broadcom Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.Broadcom Q2 Earnings Beat Estimates, Revenues Up Y/YBroadcom reported second-quarter fiscal 2026 non-GAAP earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 1.67% and rose 54% year over year. Revenues rose 48% year over year to $22.19 billion and beat the Zacks Consensus Estimate by 0.68%. The quarter benefited from accelerating AI semiconductor revenues, which reached $10.8 billion, up 143% year over year and exceeding the company’s outlook.AVGO’s Q2 DetailsSemiconductor solutions revenues (68% of net revenues) totaled $15.01 billion, up 79% year over year. Management said the upside was powered by AI semiconductors, with networking representing almost 40% of AI revenues in the quarter. Infrastructure software revenues (32% of net revenues) climbed 9% year over year to $7.18 billion. Management noted that software bookings stayed strong and the company sustained ARR growth of 17% year over year.Profitability remained a standout despite mix headwinds. Non-GAAP gross margin was 77.1%, down 230 basis points year over year as semiconductors became a larger proportion of the mix. Research and development expenses, as a percentage of net revenues, decreased 290 bps year over year to 7.2%. SG&A expenses, as a percentage of net revenues, decreased 130 bps to 2.6%.Adjusted EBITDA rose 52% year over year to $15.24 billion. The adjusted EBITDA margin was 68.7%, up 210 bps year over year. Operating margin rose 52.4% year over year to a record $14.9 billion, reflecting strong operating leverage as non-GAAP operating margin expanded 200 bps year over year to 67.3%.AVGO’s Balance Sheet & Cash FlowAs of May 3, 2026, cash and cash equivalents were $19.63 billion, up from $14.17 billion as of Feb.1, 2026.Total debt (including the current portion of $3.15 billion) was $66.06 billion as of Feb. 1, 2026 compared with $65.14 billion as of Nov. 2, 2025.Broadcom generated $10.49 billion in cash flow from operations in the quarter compared with $8.26 billion in the previous quarter. The free cash flow was $10.26 billion compared with $8.01 billion in the prior quarter.During the quarter, Broadcom paid stockholders $3.09 billion of cash dividends based on a quarterly common stock dividend of $0.65 per share. The company also repurchased $600 million of common stock under its repurchase program.AVGO Offers Q3 GuidanceFor the third quarter of fiscal 2026, Broadcom expects revenues of approximately $29.4 billion, indicating 84% year-over-year growth. The company expects non-GAAP operating income and adjusted EBITDA to be approximately 67% and 68% of projected revenues, respectively. Management also guided for semiconductor revenues of roughly $20.5 billion and infrastructure software revenues of about $8.9 billion for the third quarter of fiscal 2026. Within semiconductors, management expects AI semiconductor revenues to accelerate to $16 billion in the third quarter of fiscal 2026, soaring more than 200% year over year, as demand for custom AI accelerators and AI networking remains strong.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a upward trend in estimates review.VGM ScoresCurrently, Broadcom Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock has a score of D on the value side, putting it in the bottom 40% for value investors.Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Broadcom Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerBroadcom Inc. is part of the Zacks Electronics - Semiconductors industry. Over the past month, Credo Technology Group Holding Ltd. (CRDO), a stock from the same industry, has gained 11.2%. The company reported its results for the quarter ended April 2026 more than a month ago.Credo Technology Group reported revenues of $437 million in the last reported quarter, representing a year-over-year change of +157%. EPS of $1.16 for the same period compares with $0.35 a year ago.For the current quarter, Credo Technology Group is expected to post earnings of $1.16 per share, indicating a change of +123.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Credo Technology Group. Also, the stock has a VGM Score of C.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks