Hours after Oracle's spectacular 13% crash on AI spending concerns, semiconductor giant Broadcom will report its fiscal fourth-quarter earnings. The timing couldn't be more poignant—or the contrast more instructive.

While Oracle is spending $50 billion hoping to attract AI customers, Broadcom is already selling the chips those customers need. The difference between hoping for AI revenue and having AI revenue is, apparently, about 35% of stock price.

What Wall Street Expects

Consensus estimates for Broadcom's Q4 fiscal 2025 results:

  • Revenue: $17.4-$17.5 billion (up 24% year-over-year)
  • Adjusted EPS: $1.87 (up 30-32% year-over-year)
  • AI revenue: $6.2 billion (up 66% year-over-year)

The AI revenue figure is the headline number. At $6.2 billion, AI-related sales would represent roughly 35% of Broadcom's total revenue—up from virtually nothing just three years ago.

The Broadcom Business Model Advantage

Broadcom's AI exposure differs fundamentally from Oracle's, and understanding this distinction is crucial for investors navigating the AI landscape.

Broadcom Sells Products, Not Promises

When Broadcom books AI revenue, it means chips have shipped and been paid for. These are custom accelerators (XPUs) designed specifically for hyperscale customers like Google, Meta, and reportedly Amazon. The customers have already committed to the technology and are deploying it in production.

Contrast this with Oracle, which is spending billions on data centers hoping customers will eventually show up to use them. Broadcom's revenue is realized; Oracle's is projected.

Custom Silicon Creates Switching Costs

Broadcom designs custom chips tailored to each major customer's specific AI workloads. Once a hyperscaler commits to Broadcom's silicon, switching to a competitor requires years of re-engineering. This creates recurring revenue and pricing power that commodity infrastructure providers like Oracle can't match.

Asset-Light Model

Broadcom designs chips; it doesn't manufacture them. Taiwan Semiconductor (TSMC) handles fabrication. This means Broadcom can scale AI revenue without the massive capital expenditure burden that's crushing Oracle's stock price.

The $40 Billion AI Revenue Target

On its September earnings call, CEO Hock Tan dropped a bombshell: Broadcom expects AI revenue to double to $40 billion in fiscal 2026. That's not Wall Street's projection—that's company guidance.

To put that in perspective: $40 billion would make Broadcom's AI business alone larger than AMD's entire revenue. It would represent one of the fastest-growing segments in semiconductor history.

The catalyst: a $10 billion AI order from a new "qualified customer," widely believed to be OpenAI or a major cloud provider building out dedicated AI infrastructure.

Valuation: The Elephant in the Room

Broadcom's stock has surged 74% in 2025, pushing the market capitalization near $1.8 trillion. At current prices around $390, the stock trades at:

  • Trailing P/E: 95.66x
  • Forward P/E: 42.73x
  • Five-year median P/E: 17x

Even after Oracle's crash, Broadcom's valuation remains stretched by historical standards. The company needs to deliver exceptional growth just to justify current prices—let alone drive further appreciation.

Bears argue that even bulletproof AI revenue growth can't support a 95x trailing multiple. Bulls counter that forward earnings—incorporating the $40 billion AI revenue guidance—make the valuation more reasonable.

Risks to the Bull Case

Despite its advantages, Broadcom faces real risks:

Customer concentration: A handful of hyperscalers represent the bulk of AI revenue. If Google or Amazon decide to design chips in-house (as Apple did), Broadcom loses a major customer with no replacement.

In-house competition: Analysts at Bank of America have flagged that Google's Alphabet is developing future generations of AI chips internally. Amazon has its Trainium chips. Customer defection is a legitimate concern.

Nvidia competition: Nvidia's GPUs remain the default choice for most AI workloads. Broadcom's custom silicon serves a niche—large enough to be lucrative, but not the whole market.

Cyclicality: Semiconductor demand is cyclical. If enterprise AI spending slows—as Oracle's results suggest it might—Broadcom's growth could decelerate rapidly.

What to Watch Tonight

When Broadcom reports after market close, focus on these metrics:

AI revenue growth rate: The 66% expected growth needs to continue or accelerate to support the $40 billion fiscal 2026 target.

Fiscal 2026 guidance: Management's outlook for next year will set expectations. Any reduction in the $40 billion AI revenue target would be catastrophic for the stock.

Customer commentary: Details on the $10 billion order and pipeline visibility will indicate whether AI demand is sustainable.

Margin trajectory: AI chips carry premium margins. Expanding AI mix should improve profitability—watch for confirmation.

The Oracle-Broadcom Divergence

Today's market action illustrates a critical distinction in AI investing:

Infrastructure builders (Oracle): Spend massive capital hoping to attract AI workloads. Revenue depends on winning competitive cloud deals. Returns uncertain.

Component suppliers (Broadcom): Sell essential components to customers who have already committed to AI. Revenue depends on AI adoption broadly, not winning specific contracts. Returns more predictable.

Both can succeed if AI delivers on its promise. But Broadcom's model requires AI to work somewhere; Oracle's model requires AI to work specifically in Oracle's data centers.

That's a crucial difference when $50 billion is on the line.

The Bottom Line

Broadcom's earnings tonight will either validate or challenge the AI semiconductor thesis. After Oracle's crash, the market is nervous about AI spending returns. Broadcom has a chance to provide reassurance—or confirm that even the best-positioned AI plays face headwinds.

For investors, the Broadcom-Oracle contrast offers a framework: in the AI gold rush, selling picks and shovels (Broadcom's chips) may be safer than running a hotel for miners (Oracle's data centers).

But even the safest AI plays aren't immune to valuation risk. At 95x trailing earnings, Broadcom has limited room for disappointment. Tonight's report will reveal whether that premium is justified.