09.03.2026 Consolidation Notice

With conflict escalating in the Middle East, Broadcom’s (ticker: AVGO) earnings release for the first quarter (Q1) of its Fiscal Year 2026 (FY 2026) on the 3rd of March 2026 mostly went under the under the radar to all but a narrow section of the market that was tracking AI-relevant stocks. While the company’s earnings trends and future outlook estimated by the company’s management clashes with the broader market outlook, there are some factors to look forward to.

Trend Analysis

In November 2023, Broadcom completed its acquisition of cloud computing and virtualization technology company VMWare, thus giving it a foothold in enterprise software, virtualization, and hybrid cloud infrastructure. Lately, the company is expanding partnerships to combine VMware Cloud Foundation with AI/ML workloads – including integration with NVIDIA GPUs/DPUs – to allow enterprises to run AI/ML alongside traditional enterprise workloads. This has had an effect on past line item trends versus those in the most recent quarter in multiple ways.

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Source: Company Information; Leverage Shares analysis

Upon acquiring VMware, Broadcom had to recognize roughly $45.6 billion in intangible assets (customer relationships, developed technology, and trademarks), a large portion of this non-cash expense was assigned into the “Cost of Revenue” for the software segment in FY 2024.

Broadcom began transitioning VMware from a perpetual license model to a subscription-only model, leading to the “Services” component of these subscriptions incurring higher direct costs such as cloud hosting infrastructure and 24/7 enterprise support. But it also led to a skyrocketing of revenues in its “subscription and services” segment in FY 2024.

In FY 2024, Broadcom cut nearly $3 billion in annual overhead by eliminating overlapping roles, divesting non-core units like the End-User Computing business (which was sold to KKR for $3.5B), and focusing R&D only on the highest-margin product, the VMware Cloud Foundation (VCF). This was a strategic decision as revenue from AI chips (XPUs and Ethernet switches) had tripled and dropped a disproportionate amount of profit directly to the operating income line.

In Q3 FY 2024, Broadcom performed a massive intra-group transfer of intellectual property rights to the United States, resulting in a one-time non-cash tax benefit amounting to several billion dollars into net income. The company’s massive free cash flows empowered the company to repurchase shares and boost the net income per share for FY 2024 even higher. Broadcom also reports along two other segments: “semiconductor solutions” – wherein the physical chips and components that move data are designed – and “infrastructure solutions”, which provides software to act as the brain to hardware deployed. The “infrastructure solutions” segment has witnessed a massive boost with the VMWare acquisition and its effects are evident in FY 2024’s trends.

Source: Company Information; Leverage Shares analysis

During the earnings call, CEO Hock Tan is aiming for over $100 billion in AI-chip-only revenue by 2027, which leans into the outsized growth pattern seen in the “semiconductor solutions” segment in Q1 2026. While “infrastructure solutions” is trending either towards modest growth or flat performance relative to the past FY, it’s a high-margin cash engine with a strong showing in both operating income as well as net income.

Overall, the company is projecting a raised Q2 2026 revenue outlook of $22.0 billion, which is significantly above the $20.5 billion consensus, and implies a 47% YoY growth. To further defend strong bottom line (i.e., net income per share) performance, a new $10 billion share repurchase program was authorized and the quarterly dividend is being maintained at $0.65 per share.

Post-Earnings Trajectory Explained

Following the earnings release, Broadcom’s stock skyrocket from around $320 level towards $345 on the 9th of March. Since then, the stock has begun to drop after failing to crack the $350 psychological level. Given surging oil prices and geopolitical tensions triggering a “risk-off” sentiment across the semiconductor sector, the market is currently testing the $330 level as immediate support. If this doesn’t hold, the next major technical floor sits near its pre-earnings consolidation zone at the $315 level.

As of the 13th of March 2026, the stock’s Relative Strength Index (RSI) is “Neutral” at around 45 while momentum indicators such as STOCH are trending at “Sell”. This is a direct reflection of the market being in a state of churn with various segments of market participants at odds with one another. While Broadcom’s VCF could be construed as a high-margin cash generator, it also competes with open-source alternatives like Nutanix or Proxmox – with rising costs of AI infrastructure creating conditions for enterprises to seek expense-lightening alternatives.

Geopolitical tensions also lend a hand to a bearishness on the stock: it is estimated by various sources that Gulf Cooperation Council (GCC) countries in the Middle East – from which energy supplies to the rest of the world are currently halted due to the conflict – hold around $1-2 trillion of U.S. market assets, of which 75% are estimated to be held in stocks. With revenues from energy sales drying up and damage mounting, the market seems to be on edge over the prospect of sales of market assets to make up for the shortfall.

Tech has generally been a highly favoured investment theme among those participating in U.S. markets. If sell-offs by the GCC’s sovereign funds and their proxies begin, the valuation of Broadcom could possibly take a substantial hit.

Professional investors in Europe might like to consider the +3X Long Broadcom ETP (AVG3) and the -3x Short Broadcom ETP (AVOS) during bullish and bearish trends in the stock. For a broader yet leveraged exposure, the +4X Long Semiconductors ETP (SOXL) and the -4X Short Semiconductors ETP (SOXS) are at hand.

Furthermore, the Broadcom Options ETP (LSE ticker: AVGY) seeks to generate monthly income by buying NVIDIA shares and selling put options on them.

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