The recovery of non-AI businesses drives growth, and Wall Street expects Broadcom's (AVGO.US) Q4 to exceed expectations

Broadcom (AVGO.US) is expected to report its fourth-quarter earnings after the market closes on Thursday, December 12, with the consensus expecting the company to post positive growth, driven by the recovery of its non-AI semiconductor business. Wall Street analysts expect Broadcom to earn $1.39 per share, with revenue expected to be $14.06 billion, up 51.2% YoY.

As Broadcom is set to report its fourth-quarter earnings, Citigroup reiterates its "buy" rating and raises its target price. The firm's analyst Christopher Danely noted in a report that the company's earnings are expected to beat expectations, driven by the recovery of its non-AI semiconductor business, and the better-than-expected gross margin outlook due to the improvement in its software mix.

While Morgan Stanley also expects Broadcom's fourth-quarter earnings to exceed expectations, it expects the revenue outlook for the next quarter to be lowered due to the seasonal trends of its core semiconductor business. The firm's analyst noted in a report: "Overall, we see no revenue risk for fiscal 2025, in fact, we expect revenue and EPS to rise for the full year, and we expect demand for its AI products to remain strong."

Broadcom's performance has consistently exceeded market expectations, with 100% of its revenue and EPS beats over the past two years. Its AI-centric strategy has paid off this year, with its shares up over 58% year-to-date, outperforming the 26% rise of the S&P 500. There have been some revisions to the financial estimates for Broadcom over the past three months, with seven upgrades and two downgrades for EPS estimates, and six upgrades and two downgrades for revenue estimates.

Despite the company's disappointing earnings forecast for the previous quarter, which disappointed some investors, Broadcom expects fourth-quarter revenue of $14 billion, with adjusted EBITDA accounting for about 64% of total revenue, showing its financial position remains strong.