Broadcom sees 4Q AI semiconductor revenue $6.2B, estimated $5.82B

Broadcom sees 4Q AI semiconductor revenue $6.2B, estimated $5.82B

Broadcom (AVGO.US) is poised to release its fourth quarter earnings report on September 4, Eastern Time. The company is expected to report AI semiconductor revenue of $6.2 billion, according to analysts. This figure is notably higher than the estimated $5.82 billion [1].

The anticipated earnings per share (EPS) is $1.067, reflecting a return to profitability year-on-year. The company's AI semiconductor business, which includes customized application-specific integrated circuits (ASICs) and network solutions, has shown strong demand, particularly from hyperscalers like Google and Meta. The mass production phase of Google's TPUv6 3-nanometer chip, code-named "Ironwood," is a significant driver of this growth [1].

The AI business revenue for the current quarter is expected to reach $5.2 billion to $5.4 billion, surpassing market expectations of $5.1 billion. The guidance for the next quarter suggests a sequential growth of 8% to 10%, which is likely to exceed market expectations. The continued strong demand for AI networks and the commencement of mass production for Meta's MTIA inference chips are expected to contribute to this growth [1].

The TPUv6p is expected to ramp up rapidly in the second half of 2025, and this trend is projected to continue into 2026. The wafer demand for its CoWoS wafer-level packaging has increased by 51% year-on-year, indicating a robust demand for AI-related products [1].

The company's infrastructure software business, particularly VMware, is also expected to perform strongly. The demand for VMware Cloud Foundation (VCF) full-stack solutions is robust, with large enterprise customers converting to higher average selling price (ASP) products and upselling [1].

The stock currently trades at a P/E of 108.14, which is significantly higher than the industry average and the P/Es of peers like NVIDIA and AMD. Analysts are split on the valuation, with 35 analysts recommending a "Buy" rating and a target price of $301.31, while skeptics argue that the fair value is $195.42 [2].

The market sentiment is mixed, with a predominantly bullish trend indicated by the decrease in the put-to-call option ratio and an increase in transaction volume. However, the high valuation and potential margin pressures from low-margin XPUs are areas of concern [2].

In conclusion, Broadcom's fourth quarter earnings report is expected to show strong growth in AI semiconductor revenue, driven by robust demand and the mass production of advanced AI chips. However, the high valuation and potential margin pressures are factors that investors should consider. Historically, AVGO has demonstrated a positive performance pattern following earnings releases, with a 64.29% win rate over 3 and 10 days, and an average 3-day return of 2.30%. While the 30-day win rate drops to 50%, the data suggests short-term momentum post-earnings could favor buyers, though long-term valuation concerns remain.



References:
[1] https://news.futunn.com/en/post/61537786/a-forward-looking-perspective-broadcom-s-earnings-report-can-the
[2] https://www.ainvest.com/news/broadcom-q3-earnings-outlook-market-position-ai-driven-growth-strategic-valuation-analysis-2509/