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Earnings Options Strategy | Another Major Catalyst After NVIDIA! Can Broadcom's Custom AI Chip Growth Exceed Expectations?

$Broadcom (AVGO.US)$ It will release its Q3 FY2026 earnings after the market close on Wednesday, September 2 (ET). This is a critical milestone for the accelerated realization of its AI business in the current fiscal year.

In the AI computing power supply chain, $NVIDIA (NVDA.US)$ has long captured market attention with its general-purpose GPUs; $Broadcom (AVGO.US)$ has taken a different path by designing custom AI chips for large tech companies, establishing unique competitive barriers in this niche segment.

In late August, NVIDIA just reported strong earnings, with its data center business continuing to lead, providing阶段性 validation for market enthusiasm toward AI infrastructure spending.Next up, Broadcom will report its earnings, shifting market focus quickly to this leader in custom AI chips:Whether AI revenue can move from guidance to actual delivery will directly test the strength of this differentiated strategy.

1. Earnings Expectations: What the Market Is Looking for Behind the Numbers

Consensus institutional expectations $Broadcom (AVGO.US)$Revenue for Q3 2026 is projected to reach $29.435 billion, an 84.52% year-over-year increase; EPS is expected to be $2.55, up 199.53% year-over-year.

The above figures are based on US GAAP accounting standards.

For reference, Broadcom reported consolidated revenue of $22.19 billion in Q2 2026 (up 48% YoY) and AI semiconductor revenue of $10.8 billion (up 143% YoY), both setting new quarterly records. The CEO stated during the earnings call that AI semiconductor revenue in the second half of the fiscal year would "double" compared to the first half.The company's previous guidance for AI semiconductor revenue was $16 billion, implying a year-over-year growth rate of over 200% for the quarter.

From a full-year perspective, Broadcom maintained its long-term targets in Q2: $56 billion in AI semiconductor revenue for fiscal year 2026, and over $100 billion for fiscal year 2027.If Q3 AI revenue materializes as expected, the progress toward the $56 billion annual target will be more convincing.The key lies in whether management is willing to provide more positive signals during the conference call.

II. Four Key Focus Areas of the Earnings Report

AI Business: A Critical Test from Guidance to Delivery

This is the most important validation point in this earnings report. Investors should closely monitor: whether Q3 AI semiconductor revenue meets or exceeds the $16 billion guidance; management's latest outlook for Q4 AI revenue; the breakdown of growth rates for custom chips versus networking chips; and the backlog of AI-related orders along with customer delivery pacing.

Guidance and Long-Term Targets: Reiteration or Increase?

$Broadcom (AVGO.US)$ The stock price declined after the Q2 earnings report, partly because the $16 billion Q3 AI guidance fell short of some analysts' expectations of $17 billion. The market was concerned that while the guidance was high, it wasn't high enough. The new guidance figures provided in this earnings report are also worth watching.

Broadcom reiterated its AI revenue targets for fiscal years 2026 and 2027 last quarter, which disappointed some investors. Given that AI revenue continues to exceed expectations, the market hopes to see an upward revision of these targets.

Key points to watch in this earnings report: whether Broadcom reiterates or raises its targets, and whether management provides new clues regarding the growth path for 2028 and beyond.

Customer Structure: Google Partnership and Diversification Progress

Broadcom's AI semiconductor business is highly dependent on large tech customers. Last quarter, management disclosed that the company currently has six core custom chip clients, including $Alphabet-C (GOOG.US)$ 、 $Meta Platforms (META.US)$ , Anthropic, OpenAI, etc.

The partnership with Google is a key component in understanding Broadcom's AI narrative.In April 2026, Broadcom and Google signed a long-term agreement for the development and supply of future generations of custom TPUs, as well as AI rack network components through 2031.

Unlike NVIDIA's model of selling standardized GPUs to a broad customer base, Broadcom's custom chip strategy is deeply tied to a few top-tier clients. While this ensures stable relationships and high switching costs, it also means that customer concentration risk requires ongoing attention.

Meanwhile, the competitive landscape is also evolving.In late August, market rumors circulated $Alphabet-C (GOOG.US)$ and $Marvell Technology (MRVL.US)$ about a long-term agreement for custom chips worth approximately $120 billion, $Broadcom (AVGO.US)$ causing the stock price to drop about 4.6% on the day. During the Q2 earnings call, the CEO also acknowledged that Google might adopt a multi-supplier strategy for chips.

The collaboration with Apple saw a significant upgrade in July.On July 6, Broadcom disclosed that both parties had extended their long-term technical cooperation to 2031, covering the development and supply of custom ASIC chips for multiple generations of Apple products. On July 8, $Apple (AAPL.US)$ the new commitment was formally announced, with the total value expected to exceed $30 billion.

Key focus areas for this earnings report and conference call: Core customers excluding $Alphabet-C (GOOG.US)$Outside,$Meta Platforms (META.US)$ , Anthropic, OpenAI, and other clients' order and delivery progress; $Apple (AAPL.US)$ whether the $30 billion agreement brings updated revenue visibility from management's perspective; and how management responds to $Marvell Technology (MRVL.US)$ competition and customer diversification strategies.

Leverage risks in AI financing

On August 20, Bloomberg reported that $Broadcom (AVGO.US)$ is negotiating with multiple lenders to arrange over $60 billion in debt financing for AI chip projects, primarily serving AI infrastructure construction for clients such as Anthropic. The plan may include approximately $30 billion in subordinated debt and $60–70 billion in senior secured debt, with a total size approaching $100 billion.

This arrangement operates through a Special Purpose Vehicle (SPV): the SPV purchases custom chips from Broadcom and then leases them to clients, $Broadcom (AVGO.US)$ providing guarantees for part of the senior debt. This model is consistent with the "AI XPV" partnership established by Broadcom, Apollo, and Blackstone in June.

For investors, key points to watch include: the final financing scale, structure, and Broadcom's guarantee ratio; how leverage risks transmit if AI demand falls short of expectations; and whether management proactively discloses related progress during the earnings call.

3. Options Strategy: How to Position When Volatility is Moderately Low

Ahead of the earnings release, the options market signals that the market expects $Broadcom (AVGO.US)$ a single-day stock price swing of approximately 7.8% following the September 2nd earnings report. Over the past 12 quarters,Broadcom's actual volatility exceeded the options-implied expectations 7 times, while it fell short of expectations in the remaining 5 instances.

Current implied volatility (IV) is at a moderately low level, with an IV of 49.65% and an IV percentile of 37%. A moderately low IV suggests that option premiums are relatively inexpensive.

Single-Leg Directional Strategy:

If investors are bullish on Broadcom's AI revenue realization and the reaffirmation of its long-term targets, they may consider buying call options; if investors are concerned about intensifying competition or guidance missing expectations, they may consider buying put options. The maximum loss for this strategy is limited to the premium paid.

(The design images shown on screen are for illustrative purposes only and do not constitute any investment advice or guarantee; market conditions change rapidly, and displayed prices may not reflect actual market values.)

Long Straddle:

If investors expect Broadcom's post-earnings volatility to exceed the implied volatility but are uncertain about the direction—for instance, if issues such as AI delivery, competition, or financing could trigger outsized moves—they may consider entering a long straddle by simultaneously buying calls and puts with the same strike price.

Long Strangle:

Similar to a straddle, but involves buying calls and puts with different strike prices simultaneously,The cost is typically lower than that of a straddle. This strategy is suitable when volatility expectations are moderately high, but one wishes to avoid excessive premium costs.

Note: Options time value decays rapidly during earnings periods, so choose an appropriate expiration date. The maximum loss for a single-leg strategy is the premium paid, while straddles/strangles may result in losses on both legs if volatility fails to meet expectations.

Summary

$Broadcom (AVGO.US)$ Earnings reports are a critical juncture for the AI supply chain, marking the transition from expectations to reality. Compared to NVIDIA's general-purpose GPU route, Broadcom's custom chip model offers differentiated exposure to AI infrastructure. This earnings report will be a key test of whether the custom route can continue to deliver on its promises.

For investors, it is recommended to focus on: whether AI semiconductor revenue reaches $16 billion and whether Q4 guidance maintains acceleration; whether long-term targets are reaffirmed or raised; $Alphabet-C (GOOG.US)$ progress in partnerships with core clients such as Anthropic, and commentary on competition; $Marvell Technology (MRVL.US)$ disclosure of AI financing structures, as well as leverage and off-balance-sheet risks.

Fellow investors, do you think Broadcom's custom AI chip growth can exceed expectations?

Disclaimer

This content does not constitute an offer, solicitation, recommendation, opinion, or guarantee regarding any securities, financial products, or instruments. The risk of loss in trading options can be substantial. In certain circumstances, your losses may exceed the initial margin deposited. Even if you set backup instructions such as "stop-loss" or "limit" orders, losses may not be avoided. Market conditions may prevent the execution of such orders. You may be required to deposit additional margin within a short period. If the required amount is not provided within the specified time, your open positions may be liquidated. However, you remain responsible for any deficit in your account resulting from this. Therefore, before trading, you should research and understand options, and carefully consider whether such trading is suitable for you based on your financial situation and investment objectives. If you trade options, you should be familiar with the procedures for exercising options and at expiration, as well as your rights and obligations when exercising options and at expiration. Options trading involves high risk and is not suitable for all investors. Before engaging in any options trading strategy, investors should carefully read "Characteristics and Risks of Standardized Options" 。

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