Broadcom Earnings Preview: AVGO Stock Near Record Highs

Key Points

• Broadcom will release earnings on June 5. Here's what to watch for.
• New information surrounding the company's four potential AI chip customers and VMware updates will be key.
• Analysts are raising their price targets in the days before the release, even as the stock is trading just below all-time highs.

With earnings in the semiconductor industry mostly having come and gone for calendar Q1 2025, one massive firm still has yet to report: Broadcom NASDAQ: AVGO. Broadcom reports its fiscal Q2 results on June 5. These results cover the three months ended April 30, aligning more closely with the calendar Q1 period. NVIDIA NASDAQ: NVDA, the only larger company in the industry, reported strong earnings on May 28. They beat expectations, helping shares rise moderately. However, Broadcom’s much smaller custom chip rival, Marvell Technology NASDAQ: MRVL, failed to stand out, leading shares to fall after reporting.

Broadcom had one of the best post-earnings performances among chip stocks when it reported fiscal Q1 results in March. Shares rose by nearly 9% the day after. This helped stem generalized AI-chip market fears at the time. NVIDIA and Marvell had seen their shares take big post-earnings tumbles just days before. So, what are analysts expecting from this company in the quarter? Additionally, what are the key details of the earnings call that investors should pay close attention to?

Broadcom’s Fiscal Q2 Expectations: A High-Level Overview

In Broadcom’s fiscal Q2 2025, analysts are forecasting revenue of $14.98 billion. This would represent a sales growth rate of 20% compared to fiscal Q2 2024. This would be a significant deceleration in growth compared to last quarter, when sales grew by nearly 25%. On the adjusted earnings per share (EPS) front, analysts are anticipating $1.57. This would equate to an earnings growth rate of nearly 43%, compared to 45% in fiscal Q1. Analysts are expecting very moderate steps down in the company’s margins compared to Q4, but they expect strong margin expansion from the prior year to continue.

Earnings Call Watchlist: Custom AI Silicon & VMware Progress In-Focus

When it comes to the details of management commentary, there are several key sticking points investors will want to be aware of. First and foremost is the performance of the company’s custom AI chip business. The company currently has three big customers with whom it works. These include Google's parent company, Alphabet NASDAQ: GOOGL, and Meta Platforms NASDAQ: META. However, Broadcom is also engaged with four other large potential customers to make custom chips. Any remarks that those relationships have progressed into actual deals would be a huge positive for the stock. The company expects AI revenue of $4.4 billion for a growth rate of 44%.

Information surrounding VMware will also be important. The company has been transitioning customers to a subscription payment model. This has been a massive driver of success for the VMware acquisition. The company said last quarter that 60% of customers had transitioned. Hearing that number continue to move higher would be another very positive sign. This is particularly true as many customers have become very unhappy with Broadcom's changes to VMware. Evidence that this unhappiness leads to customers leaving or not transitioning to the subscription model would be a significant negative. Additionally, seeing a significant expansion in the number of customers using VMware Private AI Foundation would be very encouraging. This is a relatively new offering that had 39 enterprise customers last quarter. The company expects its software segment revenue to be $6.5 billion for a growth rate of 23%.

An uplifting surprise for Broadcom could come from any deals or customer engagement related to the end of the AI-Diffusion rule. NVIDIA notably announced a deal to sell thousands of chips to Saudi Arabia the day the rule was officially terminated. Could Broadcom be next to announce something similar?

Broadcom’s Near-Record Valuation Raises Stakes, Analysts Double Down

Broadcom is now trading at a much higher price than it was just before its last earnings release. Prior to its strong post-earnings surge in March, shares were hovering around $179. As of the June 2 close, Broadcom is up to nearly $249, a difference of approximately 39%. This closing price puts the stock just below its all-time high reached in December 2024. Thus, the risk and reward profile of Broadcom coming into fiscal Q2 earnings may skew to the downside. Broadcom shares have never traded even close to this high of a level before releasing earnings, adding to the risk of a downside move.

Still, analysts are raising their price targets as the report approaches. MarketBeat tracked several upgrades over the past week, which have an average price target of $287. This target implies an upside of 15% in shares from their June 2 closing price.