ETFs to Buy as Broadcom Slides Despite Better-Than-Expected Q3 Earnings

Shares of Broadcom Inc. AVGO slid almost 1% during the extended trading session yesterday despite delivering solid third-quarter fiscal 2026 results that beat Wall Street’s expectations. Its net revenues surged 86% year over year to $29.59 billion, topping consensus marks, while adjusted earnings per share (EPS) surged 96% to $3.32. 

Investor sentiment wavered, most probably because Broadcom’s fourth-quarter revenue guidance of approximately $34.8 billion came in slightly below analysts’ expectations of $35.03 billion (as cited in CNBC). 

This modest guidance shortfall, while weighing on the stock during yesterday’s extended session, may encourage investors seeking long-term exposure to AVGO to consider buying on the dip — especially given the accelerating trajectory of its custom AI chip business. 

AVGO’s AI semiconductor revenues reached $16.7 billion in the fiscal third quarter, registering a massive 221% year-over-year increase, and are projected to rise further to $21.7 billion in the fiscal fourth quarter, putting fiscal 2026 AI revenues on track to reach approximately $58 billion.

However, single-stock investing inherently exposes your portfolio to concentrated corporate vulnerabilities. Despite generating a massive $13.37 billion in free cash flow in the reported quarter, Broadcom faces structural trade-offs from the scale of its custom application-specific integrated circuit (ASIC) deployments for hyperscalers. These include lower margins relative to software and customer concentration risks tied to key clients such as Google, Anthropic, Meta and OpenAI.

For investors looking to capitalize on AVGO’s surging AI-driven demand without bearing full single-stock exposure, a more prudent strategy would be to invest in semiconductor exchange-traded funds (ETFs) with significant exposure to the chipmaker. This approach will help them mitigate risks associated with client concentration and potential geopolitical or regulatory scrutiny surrounding key AI partners.

But before identifying those ETFs, let us review AVGO’s detailed performance metrics from the fiscal third quarter.

A Brief Analysis of AVGO’s Q3 Results

Broadcom’s third-quarter fiscal 2026 adjusted earnings per share surpassed the Zacks Consensus Estimate by 3.1%, while its revenues beat the consensus mark by 0.4%.

During the fiscal third quarter, AVGO delivered Ironwood TPU version 7 in high volume to both Anthropic and Google. The company also began shipments of the next-generation TPU version 8i for Google. This new TPU generation has been designed with more memory and bandwidth compared to Ironwood and is optimized for inference workloads. 

AVGO ended the fiscal third quarter with an inventory of $4.5 billion as it continued to secure components to support strong AI semiconductor demand. 

Its Semiconductor Solutions segment registered record revenues of $20.8 billion, which went up 127% on a year-over-year basis and represented 70% of AVGO’s total revenues in the fiscal third quarter. 

Broadcom expects its gross margins to dip to 73% in the fiscal fourth quarter, down from 78% a year ago, as lower-margin, memory-intensive XPUs take up a bigger share of its revenues. However, thanks to powerful operating leverage from top-line growth, it projects operating margins to remain rock-solid at roughly 66%, matching last year’s levels.

AVGO expects AI revenues to double to approximately $115 billion in fiscal 2027 and reach $230 billion in fiscal 2028.

Broadcom-Heavy ETFs to Buy

Invesco PHLX Semiconductor ETF SOXQ  

This fund, with a market value worth $2.97 billion, offers exposure to the 31 largest U.S.-listed securities of companies engaged in the semiconductor business. Of these, AVGO holds the second spot, with a 9.48% share of the fund.

SOXQ has surged 60.1% year to date. The fund charges 19 basis points (bps) in fees and sports a Zacks ETF Rank #1 (Strong Buy). It traded at a good volume of 1.51 million shares in the last trading session. 

VanEck Semiconductor ETF SMH  

This fund, with net assets worth $66.62 billion, provides exposure to 26 companies involved in semiconductor production and equipment. Of these, AVGO holds the third spot, with a 6.21% share of the fund.

SMH has soared 52.9% year to date. The fund charges 35 bps in fees and sports a Zacks ETF Rank #1. It traded at a good volume of 5.13 million shares in the last trading session. 

iShares Semiconductor ETF SOXX  

This fund, with net assets worth $41.03 billion, offers exposure to 30 U.S. companies that design, manufacture, and distribute semiconductors. Of these, AVGO holds the fourth spot, with a 7.62% share of the fund.

SOXX has rallied 68.5% year to date. The fund charges 33 bps in fees and sports a Zacks ETF Rank #1. It traded at a good volume of 5.81 million shares in the last trading session. 

First Trust NASDAQ Semiconductor ETF FTXL 

This fund, with net assets worth $1.20 billion, provides exposure to 34 U.S. semiconductor companies. Of these, AVGO holds the sixth spot, with a 6.58% share of the fund.

FTXL has surged 69.3% year to date. The fund charges 60 bps in fees and sports a Zacks ETF Rank 1. It traded at a volume of 0.08 million shares in the last trading session.   

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This article originally published on Zacks Investment Research (zacks.com).

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