Broadcom Shares Rise on AI-Driven Growth as $5.81 Billion Volume Ranks 11th in Market Activity

On September 2, 2025, Broadcom (AVGO) closed with a 0.29% gain, trading with a volume of $5.81 billion, ranking 11th in market activity. The stock's performance aligns with its upcoming third-quarter fiscal 2025 earnings report scheduled for September 4, which has drawn significant market attention.

Broadcom's third-quarter guidance highlights a mixed outlook. While the company projects $15.8 billion in revenue—matching the Zacks Consensus Estimate—its growth trajectory reflects uneven momentum. Non-AI semiconductor revenues are expected to remain flat sequentially at $4 billion, while AI-related revenues are forecast to surge 60% year-over-year to $5.1 billion. This divergence underscores the company's strategic pivot toward AI infrastructure, driven by strong demand for custom accelerators (XPUs) from hyperscale partners. However, the shift to lower-margin AI products is anticipated to pressure gross margins by approximately 130 basis points compared to the previous quarter.

Infrastructure Software revenues are projected to grow 16% year-over-year to $6.7 billion, supported by VMware's continued transition to subscription-based models. Notably, 87% of the largest 10,000 VMware customers had transitioned by Q2 2025. Semiconductor Solutions revenue guidance of $9.1 billion aligns with the Zacks Consensus, indicating 25% annual growth. Despite these positives, challenges persist in server storage, wireless, and industrial segments, which are expected to show slower growth compared to enterprise networking and broadband divisions.

Valuation metrics suggest the stock is trading at a premium. With a forward P/E ratio of 37.05X, AVGO's valuation exceeds both industry benchmarks and peers like Cisco and Marvell. While its AI portfolio and hyperscaler partnerships position it for long-term growth, near-term risks include margin compression and macroeconomic headwinds. The Zacks Rank of #3 (Hold) reflects cautious optimism, advising investors to await clearer signals post-earnings.

Backtesting data indicates AVGO's stock has outperformed the Zacks Computer and Technology sector by 15.3 percentage points year-to-date, with a 28.2% total return compared to the sector's 12.9%. This outperformance highlights its resilience amid sector volatility, though valuation constraints and mixed business performance warrant careful monitoring ahead of the earnings release.