Broadcom Earnings On Deck – (AVGO) Stock Doubles Off April Low Leading In

Broadcom's stock price (NASDAQ: AVGO) has more than made up for a difficult start to the year, with the rally from April's low having seen AVGO more than double (+106.7%). Having gone through a little more than the first quarter of the calendar year with a decline of 37%, the turnaround has been impressive, propelling the stock above $300 into earnings.

Today's earnings report, scheduled for after market close comes at a pivotal time, with sentiment on AI chip names under a little more of a cloud than usual. Estimates for the period are strong, with expectations running high.

Analysts are projecting an EPS of $1.66 for the quarter, representing a substantial 33.87% increase compared to the same quarter last year. Revenue is expected to have grown 21.04% Y/Y to $15.82billion.

Broadcom's recent success is undeniably linked to its AI initiatives. The company's second-quarter fiscal 2025 earnings, released in June, handily beat Wall Street estimates, with an adjusted EPS of $1.58 against an expected $1.56 and revenue of $15 billion, slightly exceeding the forecasted $14.99 billion.

The standout performer was the semiconductor solutions segment, which reported a 17% year-over-year increase driven by AI-related products. CEO Hock Tan's emphasis on custom AI accelerator development for hyperscale partners further cemented the perception of Broadcom as a key player in the AI revolution. The anticipation of $5.1 billion in AI chip sales for the third quarter underscores this narrative.

While Broadcom has undeniably capitalized on the AI boom, its reliance on a handful of hyperscale customers presents a risk. These tech giants, while currently investing heavily in AI infrastructure, are also known for their rapid innovation and willingness to bring chip design in-house.

While Broadcom currently enjoys a strong position, other semiconductor companies are also vying for a piece of the pie. The barriers to entry, while significant, are not insurmountable, and it remains possible that the emergence of new players could erode Broadcom's market share and pricing power.

On balance, it is clear that Broadcom heads into earnings with a bullish setup, although hovering around the psychologically important $300 could suggest that markets are holding their breath leading in. The company has a track record of beating expectations, with each of the past four reports seeing EPS beats, yet guidance will likely hold the key to the reaction on the street.