Here's what analysts expect to see when Broadcom reports earnings later Thursday

Broadcom's stock has surged ahead of its fiscal second-quarter earnings report, driven by optimism surrounding its AI semiconductor business and expectations of a recovery in its non-AI segment; analysts anticipate strong results, with LSEG consensus estimates projecting EPS of $1.56 on revenue of $14.99 billion, representing year-over-year growth of 43% and 20%, respectively, while investment banks like Citi and Mizuho have raised price targets based on AI revenue ramps and VMware integration, though some targets suggest limited near-term upside.

Analysis

Broadcom's stock (AVGO) has demonstrated significant upward momentum, appreciating 31% over the past month and 14% year-to-date, culminating in a record high of $261.08. This surge is largely attributed to strong fiscal first-quarter earnings reported in March, alongside second-quarter sales and adjusted EBITDA guidance that surpassed analyst expectations, and the company's emphasis on "continued strength in AI semiconductor revenue." Further bolstering investor confidence was a $10 billion share buyback authorization announced in April. Analysts widely anticipate robust fiscal second-quarter results, with LSEG consensus estimates pointing to earnings of $1.56 per share (a 43% year-over-year increase) on revenue of $14.99 billion (a 20% year-over-year increase). Key growth drivers highlighted by Wall Street include the booming artificial intelligence sector, where Broadcom is a leading supplier of custom ASICs and networking chips to major clients like Google and Meta, with Citi forecasting FY25 AI sales to grow 48% YoY to approximately $18.1 billion. Concurrently, a recovery in Broadcom's non-AI semiconductor business, which Citi notes was down roughly 40% from its peak, is expected to provide an additional tailwind. The integration of VMware is also seen as a positive catalyst, with Mizuho noting it is ahead of schedule and potentially contributing to free cash flow of around $33 billion in FY25. Despite nearly 90% of analysts maintaining a buy-equivalent rating, 12-month price targets exhibit a considerable range from $200 to $301, with some targets, such as JPMorgan's $250 and Deutsche Bank's $205 (pending revision), suggesting limited near-term upside or even a potential pullback from the recent record highs.

Key Decisions for Investors

• Investors should scrutinize the upcoming fiscal second-quarter earnings report for confirmation of sustained AI revenue growth, updated full-year guidance, and specific commentary on the ramp-up of projects with key customers like Google, Meta, OpenAI, and Apple.
• Monitor management's discussion on the pace of recovery in the non-AI semiconductor segments and the tangible progress of VMware integration, particularly regarding revenue synergies and free cash flow contributions, as these are critical for validating the current valuation.
• Given the stock's substantial recent appreciation and the varied analyst price targets, investors should assess whether the optimistic outlook for AI and VMware is fully priced in, and consider the risk-reward profile, especially if results or future guidance do not significantly exceed already high expectations.