Broadcom Q3 Preview: Strong Networking Business Growth Expected

Broadcom is expected to report strong growth in its networking business in Q3, driven by increased spending by major hyperscalers on AI data centers. As a finance expert with experience at Bloomberg, I anticipate the company's revenue to be driven by its strong position in the networking market, which is expected to continue its growth trajectory in the coming quarters.

Broadcom Inc. (AVGO) is poised to report strong growth in its networking business during the third quarter (Q3) of 2025, driven by increased spending by major hyperscalers on AI data centers. This growth is expected to be fueled by the company's strong position in the networking market, which is anticipated to continue its upward trajectory in the coming quarters.

Broadcom's networking portfolio, which includes the Jericho4 Ethernet fabric router, Tomahawk 6, and Tomahawk Ultra, has been gaining significant traction among hyperscalers. The Jericho4 router, for instance, can interconnect over one million custom AI accelerators (XPUs) across multiple data centers, offering unmatched bandwidth, security, and lossless performance [1].

The company's focus on AI networking revenues has been a key driver of its growth. In the second quarter of 2025, AI networking revenues jumped 170% year over year, representing 40% of total AI revenues [1]. This strong demand for AI networking solutions has been a key catalyst for Broadcom's expansion.

In addition to its robust networking portfolio, Broadcom benefits from a rich partner base, including NVIDIA, Arista Networks, Alphabet, Dell Technologies, Meta Platforms, Juniper, and Supermicro. These partnerships have been instrumental in driving strong AI revenues [1].

Broadcom's strong balance sheet and free cash-flow-generating ability also bode well for the company. As of May 4, 2025, Broadcom had $9.47 billion in cash and cash equivalents and generated $6.55 billion in cash flow from operations [1]. This strong liquidity position is helping the company lower leverage, pay consistent dividends, and return cash to shareholders through buybacks.

However, Broadcom's third-quarter fiscal 2025 guidance reflects some sluggishness in server storage, wireless, and industrial businesses. The company expects third-quarter fiscal revenue of $15.8 billion, suggesting 21% year-over-year growth but indicating modest sequential growth [1].

Despite these challenges, Broadcom's expanding AI portfolio and rich partner base reflect solid top-line growth potential. The company's stock has outperformed its peers, including Cisco Systems (CSCO) and Marvell Technology (MRVL), with shares rising 30.4% year to date compared to Cisco's 16.9% and Marvell's 32% [1].

In conclusion, while Broadcom faces some headwinds in certain business segments, its strong position in AI networking and robust financials position the company well for continued growth. Investors should closely monitor Broadcom's third-quarter earnings report to assess the company's performance and prospects.

References:
[1] https://www.nasdaq.com/articles/avgo-expands-data-center-portfolio-jericho4-hold-stock