Broadcom fell more than 5% in after-hours trading despite a fiscal second-quarter beat. Revenue rose 48% year on year to $22.19bn, which was $70m above consensus, while adjusted EPS came in at $2.44, beating estimates by $0.04. Semiconductors revenue climbed 79% to $15.01bn and infrastructure software rose 9% to $7.18bn. The company guided fiscal Q3 revenue to $29.4bn, described as more than $1bn above consensus, while CrowdStrike dropped more than 9% even after reporting adjusted EPS of $1.10, $0.03 ahead, on $1.39bn of revenue, $30m above expectations.
CrowdStrike also posted net new annual recurring revenue up 32% to $256m in Q1, raised full-year guidance slightly and announced a 4-for-1 stock split. Broadcom’s chart moved below its 20-period SMA on the four-hour timeframe, with the 50-period SMA near $434; levels cited include $420 and a volume zone between $405 and $420, with $460 as a higher reference point. CrowdStrike broke its 20-period SMA and found support at its 50-period average, with further levels referenced at $645 and $620.
Market Expectations and Post-Earnings Price Behavior
We are seeing a clear pattern where even strong earnings reports are not enough to satisfy the market’s sky-high expectations for AI-related stocks. Both Broadcom and CrowdStrike beating estimates and then selling off confirms this trend. This tells us that upside is likely capped in the immediate aftermath of news events.
With Broadcom, we note the high implied volatility heading into its upcoming earnings announcement. Current options pricing suggests a move of over 8%, a significant swing for a stock trading near $1,430. Given the market’s tendency to sell the news, we believe selling premium is the correct approach here.
A strategy to consider is an iron condor or a simple bear call spread, positioned above the recent all-time highs. With the broader market volatility index, the VIX, holding steady below 15, this high implied volatility seems isolated to earnings. This allows us to collect rich premiums while defining our risk if the stock does manage to surge unexpectedly.
Trading Opportunities Around Volatility and Support Levels
CrowdStrike offers a different opportunity now that its earnings have passed. We saw the expected post-announcement volatility crush, where the value of its options decreased sharply. The stock initially dipped below $310 despite beating revenue forecasts and posting 33% growth in annual recurring revenue.
This dip towards its 50-day moving average, coupled with the now lower cost of options, presents a potential entry point. We can look to buy call options or establish bull put spreads below current support levels. This strategy bets that the initial negative reaction was overblown and the stock will revert to its longer-term upward trend.
This phenomenon isn’t new; we saw similar reactions with Microsoft and Meta Platforms in previous quarters. Historically, even during the dot-com era, market leaders often faced sharp, short-term pullbacks when their stellar growth was merely in line with, or slightly above, very high expectations. Therefore, we should trade the volatility around these events rather than the directional outcome of the earnings report itself.
