Is Now the Time to Buy Broadcom (AVGO) Amid Record AI Growth and Strong Earnings Momentum?

In the fast-evolving landscape of artificial intelligence (AI), few companies have positioned themselves as strategically as Broadcom Inc. (AVGO). The chipmaker's recent financial results and forward-looking guidance paint a compelling picture of sustained growth, driven by its AI semiconductor solutions and infrastructure software. With AI revenue surging 46% year-over-year to $4.4 billion in Q2 2025 and accelerating further to an expected $5.1 billion in Q3, Broadcom is not just riding the AI wave—it's leading it. But with a Forward P/E ratio of 42.7 and a PEG ratio of 1.66, is the stock overvalued, or is the premium justified by its earnings momentum and market dominance?

AI-Driven Revenue Acceleration: A Catalyst for Long-Term Growth

Broadcom's AI semiconductor division has become a revenue engine, contributing over $4.4 billion in Q2 2025 alone. This represents a 46% year-over-year increase, fueled by robust demand for AI networking solutions and partnerships with hyperscale cloud providers. CEO Hock Tan has emphasized that AI semiconductor revenue is on track to hit $5.1 billion in Q3, marking ten consecutive quarters of growth. This trajectory underscores Broadcom's ability to capitalize on the global shift toward AI-driven infrastructure, particularly in data centers and enterprise software.

The company's dual focus on Semiconductor Solutions (56% of total revenue) and Infrastructure Software (44% of total revenue) creates a diversified growth model. While Semiconductor Solutions benefits from AI adoption, Infrastructure Software—powered by VMware integration—saw a 25% year-over-year revenue increase to $6.596 billion in Q2. This synergy between hardware and software positions Broadcom as a one-stop shop for enterprises scaling AI capabilities, a critical advantage in a competitive market.

Earnings Momentum and Analyst Confidence

Broadcom's earnings performance has consistently outpaced expectations. For Q2 2025, the company reported non-GAAP EPS of $1.58, exceeding the Street's $1.56 target. Over the past four quarters, Broadcom has not only met but exceeded earnings estimates, with a 2.03% revenue beat in its most recent report. Analysts have taken notice: the Zacks Consensus Estimate for 2025 EPS is $6.64, reflecting a 36.34% year-over-year increase.

Historically, AVGO's earnings beats have translated into positive returns for investors. From 2022 to the present, the stock has delivered a maximum return of 7.55% within 59 days of an earnings beat. Short-term momentum has also been strong, with a 58.33% win rate over 10 days and a 41.67% win rate over 3 days following beats. These results suggest that Broadcom's ability to consistently exceed expectations has historically created tailwinds for the stock, particularly in the medium term.

Despite a Zacks Rank of #3 (Hold), the slight upward revision of 0.01% in EPS estimates over the past month signals growing confidence in Broadcom's ability to sustain momentum. This is further supported by the company's $7.0 billion shareholder return program in Q2, including $4.2 billion in stock buybacks, which demonstrates management's commitment to rewarding investors amid strong cash flow generation (free cash flow of $6.411 billion, or 43% of revenue).

Valuation Dynamics: Justifying the Premium

Broadcom's valuation metrics—Forward P/E of 42.7 and PEG of 1.66—raise questions about whether the stock is overvalued. However, these figures must be contextualized against the company's 20% revenue growth and 35% increase in Adjusted EBITDA to $10.001 billion in Q2. The PEG ratio, while above 1, becomes less concerning when considering Broadcom's projected 36.34% EPS growth in 2025, which aligns with its AI-driven expansion.

Moreover, Broadcom's strategic investments in AI chip development for cloud partners and its $15.8 billion Q3 revenue guidance (21% year-over-year growth) suggest that the company is not merely maintaining its position but actively expanding its market share. The stock's 12% rise in 2025 and doubling in 2024 reflect investor optimism, but the current valuation appears to price in only a portion of its long-term potential.

The Investment Case: Balancing Risk and Reward

For investors, the key question is whether Broadcom's valuation is a warning sign or a sign of strong fundamentals. The stock's premium P/E and PEG ratios are justified by its sustained revenue acceleration, operational efficiency (67% EBITDA margin), and strategic positioning in AI infrastructure. However, risks include intensifying competition in the AI chip sector and potential market saturation if AI adoption slows.

That said, Broadcom's 10-quarter AI growth streak, $9.472 billion cash reserves, and commitment to shareholder returns create a resilient business model. The company's ability to innovate—such as its recent advancements in AI networking solutions—positions it to outperform peers as AI demand remains robust.

Conclusion: A Premium Stock for a Premium Opportunity

Broadcom (AVGO) is undeniably expensive on traditional valuation metrics, but its AI-driven revenue acceleration and earnings momentum make the premium justifiable for long-term investors. While the stock may not offer immediate bargain-bin appeal, its strategic dominance in AI infrastructure, consistent outperformance, and aggressive shareholder returns suggest that the current valuation is a reflection of its growth trajectory rather than a mispricing.

For investors willing to tolerate near-term volatility in favor of long-term compounding, Broadcom presents a compelling case. The key will be to monitor earnings revisions, AI revenue trends, and capital allocation decisions as the company navigates the next phase of its AI expansion. In a world where AI is the new electricity, Broadcom is not just a participant—it's a leader. Now may be the time to buy, but with a clear eye on the horizon.