Earnings Playbook | Broadcom's AI Blockbuster Finale: How to Position Ahead of Earnings?

The current US earnings season is about to reach its grand finale— $Broadcom (AVGO.US)$ will report its second-quarter fiscal 2026 results (covering February to May in calendar terms) after US market hours on June 3.

For investors, Broadcom’s earnings are never just a numbers update—they serve as the ultimate litmus test for AI sector sentiment. Moreover, in the options market, Broadcom is renowned as a 'volatility machine.' With this critical earnings announcement looming and the stock having just hit an all-time high last week, how should one position ahead of the event?

Broadcom takes center stage, expected to deliver a 'perfect ending' to this earnings season.

During each US earnings season, semiconductor giants tend to appear in a specific sequence, andBroadcom is often among the last mega-cap companies to report.

Looking back at this earnings cycle, the dominant themes have been“AI capital spending has not yet peaked” and “earnings continue to beat expectations.”Microsoft, Google, Meta, and other hyperscale cloud providers have all issued capital expenditure guidance far exceeding market expectations, with a clear focus on AI infrastructure.Driven by massive capital spending, the entire AI supply chain has consistently delivered results above expectations, becoming the key driver behind the broader market rebound since April.

Broadcom is a leading global supplier—essentially a 'picks-and-shovels' provider—for hyperscale cloud vendors developing in-house AI chips (ASICs) and high-speed networking solutions. If $NVIDIA (NVDA.US)$ represents the pinnacle of general-purpose GPU computing power, then Broadcom embodies the foundational layer for customized compute (XPU) and network interconnectivity. Broadcom’s financial performance directly reflects the actual level of investment hyperscale clients are making in in-house AI computing capabilities, making it the most critical indicator of whether AI compute demand is deepening and expanding meaningfully.

The market widely expects Broadcom to cap off this earnings season on a high note.Analysts expect Broadcom to report revenue of $22.112 billion for fiscal Q2 2026, up 47.38% year-over-year, and earnings per share of $1.725, an increase of 67.49% year-over-year.

Key Focus Areas for the Earnings Report

This optimism is not unfounded—it is grounded in solid industry logic: as AI scales into clusters of tens of thousands or even hundreds of thousands of GPUs,demand for Broadcom’s Tomahawk switching chips and custom XPUs becomes both essential and irreplaceable.For this earnings report, the market is expected to focus on the following core topics:

(1) AI Revenue Momentum: Poised for Another 'Beat & Raise'

During last quarter’s earnings call, Broadcom provided an exceptionally strong Q2 outlook: total revenue of approximately $22 billion (up 47% year-over-year), with AI semiconductor revenue expected to reach $14.8 billion (up 76% year-over-year). The current market consensus is that this guidance is highly likely to be exceeded.

A deeper focus lies on the full-year outlook. Investment banks such as Goldman Sachs and Citi widely expect Broadcom’s total AI revenue for FY26 (ending October 2026) to surpass $50 billion.If management raises its full-year AI revenue guidance during this earnings call, it would serve as a direct catalyst for the stock price.

Broadcom previously stated that its AI revenue target for FY27 will exceed $100 billion. With major contracts such as those with $Alphabet-A (GOOGL.US)$ and Anthropic now secured, many institutions believe this target is 'conservative' and subject to upward revision. Even if management merely expresses greater confidence in the FY27 target during this call—or hints that the midpoint of its SAM (Serviceable Addressable Market) could move higher from the current $75 billion—it could trigger aggressive buying interest.

(2) XPU Customer Progress: Increasingly Diversified

This is Broadcom’s core growth narrative.Historically, Broadcom’s AI revenue was heavily reliant on customers like Google; however, its customer base is now expanding rapidly:

Deepening relationships with existing customers: Signed a long-term TPU supply agreement with Google through 2031, with technology that leads Google’s internal in-house projects by more than 18 months; and with $Meta Platforms (META.US)$ Reach long-term, large-scale inference collaboration.

New customer ramp-up: Anthropic extended its collaboration through 2027 to provide 3.5 GW of computing capacity; OpenAI is expected to deploy its first-generation XPU at scale in 2027 (exceeding 1 GW); additional customers include ByteDance and SoftBank/ARM ecosystem partners.

The evolution of Broadcom’s customer base means its revenue foundation has become more diversified, significantly enhancing its resilience to cyclical downturns. The market especially anticipates management disclosing specific order volumes and delivery schedules for new XPU customers during the earnings call.

(3) Margin Trend: Upside surprise from rack-level delivery models?

Previously, the market had concerns that the shift toward 'full-rack' delivery models for AI infrastructure could dilute Broadcom’s gross margins.However, recent indications suggest that significant operating leverage from AI scale, combined with rapid ramp-up of customized XPUs, could lead to gross margins exceeding expectations. Institutions such as Citi noted, 'The shift from rack-level to chip-level shipments positively impacts margins,' making sustained high-margin performance a likely outcome.

Strong rally to new highs ahead of earnings—options positioning strategy

Broadcom’s stock is currently in a strong upward trend, hitting a new all-time high on May 29 and extending gains further in after-hours trading. Trading volume surged that day, signaling strong institutional buying and confirming the breakout with solid volume support. Key moving averages are aligned in a bullish configuration, indicating favorable medium- to long-term momentum. However, multiple technical indicators have entered overbought territory, suggesting potential for a short-term pullback.

Futubull’s options analytics tool shows that Broadcom’s implied volatility (IV) ahead of earnings exhibits a typical upward bias and remains at historically elevated levels.

Historical post-earnings volatility charts indicate Broadcom typically experiences significant price swings on earnings day; the options market is currently pricing in approximately ±9% volatility for this earnings event.

Based on the combination of 'all-time high stock price + extremely high implied volatility (IV) + elevated realized volatility around earnings,' simply buying call or put options entails significantvolatility crush risk: Once earnings are released, IV collapses instantly regardless of whether the stock price rises or falls, causing option premiums to sharply decline.

Therefore, for this week’s Broadcom options positioning,the core principle is: either use spreads to reduce the hedging cost of expensive premiums, or act as a seller to harvest premium from elevated IV. Below are three practical strategies tailored to different scenarios:

Strategy 1: Bullish but wary of high IV — Bull Call Spread

Ideal for investors who expect Broadcom to deliver an earnings beat and believe the stock will break above its prior highs, but wish to avoid the high cost of buying a naked call.

Logic: Buy an at-the-money (or slightly out-of-the-money) call option while simultaneously selling a further out-of-the-money call. The short call offsets the high cost of the long call, though it also caps the maximum potential profit compared to a standalone long call.

(The design images displayed on the screen are for demonstration purposes only and do not constitute any investment advice or guarantee; market movements are frequent, and the illustrated option prices do not represent actual conditions)

Strategy 2: Defense and income enhancement for stockholders — Covered Call

Target investors: Those holding Broadcom shares long-term with low expectations for a sharp short-term rally, and who are willing to take partial profits at relatively high levels. Rationale: Leverage the currently very high implied volatility (IV) by selling out-of-the-money call options to collect substantial option premiums. For example, if you hold 100 shares of Broadcom trading at $460 and your target exit price is $500, you could sell one June-expiring $500-strike call and collect a high premium (due to elevated IV). If the stock price remains below $500 after earnings, you keep the premium risk-free; if it rises above $500, you effectively sell at $500 plus the premium received—yielding a higher realized exit price—but you forfeit any gains beyond that level.

Strategy 3: Defensive Counterattack — Iron Condor

Target investors: Those who believe the current market is overheated and expect the stock price to trade within a defined range after earnings, regardless of whether results are good or bad, without extreme moves. Rationale: Construct a medium-width iron condor by selling out-of-the-money calls and puts, while simultaneously buying further out-of-the-money calls and puts as protection. This strategy essentially capitalizes on the current high implied volatility to profit from the post-earnings collapse in volatility (volatility crush). Given Broadcom’s historically high volatility, unexpected large upward or downward price moves could result in losses, with the maximum loss capped at the net premium paid.

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Option Risk Warning:An option is a contract that grants the holder the right, but not the obligation, to buy or sell an asset at a fixed price on a specific date or at any time before that date. The price of an option is influenced by various factors, including the current price of the underlying asset, the strike price, time to expiration, and implied volatility. Implied volatility reflects the market’s expectations for the level of volatility in the option over a future period. It is a data point derived inversely from the Black-Scholes option pricing model and is generally regarded as an indicator of market sentiment. When investors anticipate greater volatility, they may be more willing to pay a higher price for options to hedge risks, resulting in higher implied volatility. Traders and investors use implied volatility to assess the attractiveness of option prices, identify potential mispricings, and manage risk exposure.

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