Earnings Preview: Strong results expected as Broadcom prepares for Q2 report

Broadcom, Inc. (NASDAQ: AVGO), a market leader in semiconductor and infrastructure software, will be reporting second-quarter results next week amid expectations for a year-over-year increase in revenue and earnings. The company, having positioned itself to capitalize on AI opportunities, sees strong demand from hyperscalers for its custom AI accelerators and networking products designed for AI data centers.

When the semiconductor giant reports its second-quarter results on June 5, after the closing bell, Wall Street will be expecting adjusted earnings of $1.57 per share on revenues of $14.97 billion. In the comparable quarter of FY24, the company earned $1.1 per share on revenues of $12.49 billion. It has a strong track record of regularly beating quarterly revenue estimates.

The Stock

The average price of Broadcom’s shares for the last 52 weeks is $184.08. After maintaining a steady uptrend since last month, the stock is hovering near its December 2024 record highs. In the past 12 months, AVGO has grown around 69%. With a market capitalization of around $1.12 trillion, Broadcom is one of the most valuable companies.

The company has issued a bullish outlook for the AI business, encouraged by its stronger-than-expected Q1 performance in that area, lifting investor confidence. Given Broadcom’s solid prospects, driven by continued demand for specialized AI chips, its current valuation appears favorable from an investment perspective.

Commenting on the management’s expectations, Broadcom’s CEO Hock Tan said in the Q1 earnings call, “Customer demand has been driven by our open ecosystem, superior low balancing, and automation capabilities that allow them to intelligently pull and run workloads across both GPU and CPU infrastructure and leading to very reduced costs. Moving on to the Q2 outlook for software. We expect revenue of $6.5 billion, up 23% year on year. So, in total, we’re guiding Q2 consolidated revenue to be approximately $14.9 billion, up 19% year on year. And this — we expect this will drive Q2 adjusted EBITDA to approximately 66% of revenue.”

Strong Q1

In the first quarter, the tech firm’s adjusted earnings rose to $1.60 per share from $1.1 per share in the corresponding period a year earlier. The bottom line has topped expectations in every quarter for nearly five years. On an unadjusted basis, net income was $5.5 billion or $1.14 per share, compared to $1.33 billion or $0.28 per share in Q1 2024. Revenues increased to $14.92 billion in Q1 from $11.96 billion in the year-ago quarter.

Currently, Broadcom’s investments are focused on creating the next generation of accelerators —specialized chips designed to speed up AI computations — and large clusters of accelerators for big customers. The company’s hyperscaler partners are spending aggressively on their next-gen frontier models that require high-performance accelerators.

On Wednesday, AVGO opened at $235.65 and was trading higher in the afternoon. The stock has gained an impressive 50% in the past six months alone.