Sometimes good news just isn't good enough. Broadcom Inc. (AVGO) shares dropped more than 10% on Friday despite delivering strong fourth-quarter earnings that beat analyst expectations across the board. The culprit? Probably profit-taking after a monster run, though the market's reaction didn't stop analysts from raising their price targets.

The Analyst Consensus: Still Bullish

Four major firms updated their outlook on Broadcom following the results, all maintaining Buy ratings while boosting their targets:

• BofA Securities analyst Vivek Arya raised his price target from $460 to $500
• Goldman Sachs analyst James Schneider lifted his target from $435 to $450
• Benchmark analyst Cody Acree jumped from $385 to $485
• Rosenblatt Securities analyst Kevin Cassidy increased from $440 to $450

That AI Backlog Keeps Growing

The headline number: Broadcom reported AI backlogs of $73 billion for the next six months, topping the consensus estimate of $69 billion, according to Arya. Even more impressive, management suggested that $50 billion to $100 billion in AI sales is possible in fiscal 2026-2027. The company's backlog and order visibility continue to increase, giving investors a clearer window into future revenue.

Broadcom also confirmed Anthropic as its fourth hyperscale customer, adding $11 billion in orders scheduled for late-2026 delivery. Then came the tease: the company announced a fifth customer. Arya speculated this mystery client "could potentially be Apple Inc. (AAPL), in our view, given it's a traditional customer with a long-term agreement for large-scale deployment."

The Numbers Behind The Headlines

Broadcom reported revenues of $18 billion, beating Street expectations of $17.5 billion, Schneider noted. Gross margins came in at 77.9%, slightly above the consensus of 77.7%. Non-GAAP earnings reached $1.95 per share, comfortably ahead of the $1.87 consensus.

AI semiconductor revenues and guidance both exceeded expectations, suggesting "ongoing momentum across both XPU and networking," Schneider wrote. However, management declined to update their prior AI revenue growth guidance for fiscal 2026.

Why The Selloff?

Acree pointed to the obvious explanation: with Broadcom's stock climbing more than 120% over the past year, profit-taking was inevitable regardless of how strong the latest results were. The latest release included Anthropic orders totaling $21 billion over the past two quarters alone, alongside that $73 billion AI order backlog.

"Broadcom is also the most direct beneficiary of Google's successful push to deploy its Ironwood TPUs for third-party use to a growing list of customers," Acree wrote. The company's AI semiconductor business rose 25% sequentially and 76% year-over-year, while AI chip sales grew 25% sequentially and more than doubled year-over-year.

Reducing The OpenAI Dependency

Cassidy emphasized that Broadcom's revenue growth came from strong AI semiconductor demand, with the company expecting AI revenue to continue expanding throughout 2026. The expanding customer base matters for diversification. "We see Broadcom's expanding XPU customer base as reducing any dependence on OpenAI," he wrote.

AVGO Price Action: Shares of Broadcom declined 10.55% to $363.07 at the time of publication on Friday.