Broadcom (AVGO) Earnings Preview: A Crucial Test for AI Chip Sentiment

Broadcom (NASDAQ: AVGO) is set to report fiscal first-quarter earnings after the market closes today, March 6. Wall Street expects the company to deliver revenue of $14.62 billion and adjusted earnings per share (EPS) of $1.51, according to FactSet estimates. For the current quarter, analysts are forecasting revenue of $14.71 billion and EPS of $1.50. This report carries heightened significance as AI chip stocks have been under significant pressure in recent weeks, with Broadcom's results poised to either break the recent losing streak or reinforce concerns about a potential AI-driven slowdown.

Key Areas to Watch

AI Growth Trajectory

Broadcom's AI-related semiconductor business is in focus, with analysts expecting AI revenue growth to slow in the first half of the year before reaccelerating in the second half of 2025. Morgan Stanley estimates AI revenue growth of just 3 percent sequentially in Q1 and 5 percent in Q2, a sharp contrast to the more aggressive AI growth seen at peers like Nvidia. While Broadcom continues to emphasize its custom AI accelerators (ASICs) for hyperscalers, near-term growth concerns are a headwind. Investors will be watching for any confirmation of new AI chip customers beyond Google, Meta, and Microsoft, as well as updates on the company’s networking products tied to AI infrastructure.

**Semiconductor Revenue Breakdown**

Broadcom is shifting to a simplified revenue reporting structure, dividing its semiconductor revenue into AI and non-AI categories. Analysts expect AI-related sales to account for approximately 25 percent of total revenue, while non-AI semiconductor revenue is expected to decline mid-single digits sequentially. Weakness in wireless and cyclical semiconductor markets may weigh on results, though the networking business remains a bright spot, particularly as AI data center demand continues to rise.

VMware Integration and Software Business

Broadcom's infrastructure software business, boosted by the VMware acquisition, is a key revenue contributor. Analysts at Susquehanna expect continued momentum from VMware, though there could be some near-term volatility as customers adjust to pricing and contract changes. Investors will be looking for updates on synergies and revenue contribution from VMware, particularly as Broadcom optimizes the portfolio.

AI Networking and Custom Silicon

Broadcom's networking segment remains a major beneficiary of AI spending, with demand checks suggesting strong AI networking results. Companies like Arista, Cisco, and Juniper have provided positive read-throughs for the sector, reinforcing expectations for continued robust demand for Broadcom’s AI networking chips. However, timing around Google's TPU ramp and potential competition from Meta’s in-house AI chip efforts could introduce short-term volatility in expectations.

Stock Performance and Analyst Sentiment Heading Into the Report

Broadcom shares have fallen more than 25 percent from their December all-time high, mirroring the broader AI chip sell-off. The stock has been hit hard following Marvell Technology's disappointing AI revenue guidance, which raised fears that AI chip demand may not be as strong in the near term as previously expected.

Broadcom has a high bar to clear, given that its last earnings report sent shares soaring 24 percent after CEO Hock Tan painted an extremely bullish long-term AI growth picture. He projected that the company’s top AI customers would collectively spend up to $90 billion on AI chips in 2027, up from $15 billion in 2024. Analysts are now looking for reaffirmation of this bullish AI trajectory.

While most analysts remain positive on Broadcom’s long-term AI positioning, recent price target revisions reflect some near-term caution:

- Morgan Stanley expects a transitional year for Broadcom’s AI business and is modeling modest near-term AI revenue growth.

- Deutsche Bank forecasts a slight revenue beat but muted near-term growth, with stronger AI acceleration in the second half of the year.

- Susquehanna sees AI networking and VMware as key revenue drivers, though it highlights uncertainty around the timing of the TPU ramp and Apple’s Wi-Fi chip transition.

- J.P. Morgan remains optimistic about Broadcom’s AI ASIC positioning, expecting custom AI chip adoption to expand as companies look for cost and efficiency improvements in AI compute.

Despite the recent AI-driven weakness, the majority of analysts maintain a "Buy" rating on Broadcom, with price targets mostly in the $225 to $259 range, implying significant upside from current levels.

Why This Report Is Critical for AI Chip Sentiment

Broadcom’s earnings report has broader implications for the AI chip sector, particularly after the recent struggles of AI-exposed semiconductor stocks. Marvell Technology’s AI revenue guidance miss triggered a steep sell-off in AI chip stocks, including Broadcom, which dropped 4.4 percent in early trading after Marvell’s report.

The semiconductor sector as a whole has been hit hard in recent sessions, with AI chip stocks struggling to regain momentum. Investors are looking to Broadcom’s earnings as a potential catalyst to reverse this trend, particularly if the company:

1. Reaffirms its bullish AI spending forecast and demand pipeline.

2. Beats on AI-related revenue and provides a stronger-than-expected AI outlook for the remainder of 2025.

3. Delivers encouraging updates on networking and custom silicon growth.

With implied volatility suggesting an 8 percent move post-earnings, the market is expecting a high-impact event. A strong report could stabilize the AI chip sector, while a disappointment could reinforce fears of a broader AI-driven slowdown.

Conclusion: High Stakes for Broadcom and AI Stocks

Broadcom’s earnings report is shaping up to be one of the most closely watched events in the semiconductor space. While AI remains a long-term growth driver, near-term headwinds—ranging from product transitions at key customers to uncertainty in wireless and networking markets—create risk for downside volatility.

The AI chip sell-off has raised the stakes for this earnings report, with investors looking to Broadcom as a key test for AI semiconductor demand. If Hock Tan can once again reassure the market with a strong AI growth outlook, it could help break the losing streak in AI chip stocks. However, if guidance disappoints, it may further exacerbate the weakness across the semiconductor sector.

With Broadcom shares sitting near 2025 lows, tonight’s report will likely determine whether AI chip sentiment stabilizes or if the sector faces another leg down.