$Broadcom(AVGO)$ is scheduled to report its fiscal Q1 2025 quarterly earnings result for period ending 31 Jan 2025.
Broadcom is expected to show a rise of 22.1% increase in revenue to $14.61 billion from $11.96 billion as compared to same period one year ago. This is very close to the guidance that AVGO given on 12 Dec 2024 which was for revenue of $14.600 billion.
The consensus earnings per share estimate for Broadcom is expected to come in at $1.51 per share.
Broadcom (AVGO) Last Positive Earnings Call Saw 4.05% Share Price Change
Broadcom gave a positive earnings call on 12 Dec 2024 and the share price saw a 4.05% change since.
The earnings call reflects a strong positive sentiment with significant revenue growth driven by AI and successful integration of VMware. However, some challenges were noted in non-AI semiconductor and broadband segments.
Broadcom (AVGO) Guidance On AI Segment Strategic Expansion
During the earnings call for Q4 2024, Broadcom provided guidance for the first quarter of fiscal year 2025, projecting consolidated revenue of approximately $14.6 billion, a 22% increase year-on-year. Semiconductor revenue is expected to grow by about 10% year-on-year to $8.1 billion, with AI-related revenue projected to rise by 65% year-on-year to $3.8 billion. Non-AI semiconductor revenue, however, is anticipated to decline by mid-teens percentage year-on-year. Infrastructure software revenue is forecasted to grow by 41% year-on-year to $6.5 billion.
The company also expects adjusted EBITDA to be about 66% of revenue for Q1. The guidance reflects Broadcom's strategic focus on expanding its AI segment, which is expected to significantly outpace growth in its non-AI semiconductor business.
Factors That Might Influence Broadcom (AVGO) Earnings
The performance of Broadcom's AI-related products and services will be a crucial indicator. The success of the VMware integration and its impact on revenue and margins will be closely watched. While AI revenue is expected to surge, the performance of non-AI semiconductor segments will also be important. Earnings per share forecasts are also something investors are watching closely.
VMware Acquisition Impact
Broadcom's $69 billion acquisition of VMware in November 2023 could significantly boost its software segment revenue. In the previous reporting, it was mentioned that the integration of VMware is largely complete, with operating margin reaching 70% exiting 2024.
Successful integration may enhance margins (software typically has higher margins than semiconductors) and diversify revenue streams.
Semiconductor Business Trends
AI and Data Center Demand: Broadcom’s networking chips (e.g., Tomahawk switches, custom AI accelerators) may benefit from sustained growth in AI infrastructure and cloud data centers.
In the previous reporting, AI revenue grew 220% from $3.8 billion in fiscal '23 to $12.2 billion in fiscal '24, representing 41% of semiconductor revenue. Infrastructure software segment revenue was $5.8 billion in Q4, up 196% year-on-year.
Cyclical Challenges: Semiconductor segments like enterprise storage and broadband might face headwinds if macroeconomic conditions soften, though the worst of the inventory correction appears past.
Software Growth
Post-VMware, software (including infrastructure and security solutions) could contribute ~45% of total revenue, providing stability and recurring revenue streams.
Financial Metrics to Watch
Revenue/EPS Growth: Analysts will look for double-digit growth YoY, driven by VMware and AI-related semiconductor demand. Fiscal year 2024 consolidated revenue grew 44% year-over-year to a record $51.6 billion. Excluding VMware, revenue grew over 9% organically.
Non-AI semiconductor revenue declined by 23% year-on-year to $4.5 billion in Q4.
Margins: Focus on whether software’s higher margins offset semiconductor cyclicality. Q4 broadband revenue was $465 million, down 51% year-on-year. Q4 industrial resales of $173 million declined 27% year-on-year.
Debt Management: Post-acquisition debt levels and cash flow generation will be critical.
Macro and Competitive Risks
Economic Conditions: A recession could dampen enterprise IT spending.
Competition: Rivals like NVIDIA (AI chips), Marvell (networking), and Intel (custom chips) may pressure growth.
AI and Cloud Tailwinds
Broadcom is well-positioned in high-speed networking (e.g., 800G optical, PCIe switches) for AI clusters. Partnerships with hyperscalers (e.g., Google, Meta) could drive design wins.
Regulatory and Integration Risks
Regulatory scrutiny on large acquisitions and execution risks in merging VMware’s operations.
Broadcom (AVGO) Price Target
Based on 26 Wall Street analysts offering 12 month price targets for Broadcom in the last 3 months. The average price target is $240.73 with a high forecast of $260.00 and a low forecast of $200.00. The average price target represents a 28.40% change from the last price of $187.48.
I think investors would be looking closely on how Broadcom has performed in the AI demand space, though there is a generally positive sentiment regarding Broadcom's growth prospects, particularly in the AI space.
Technical Analysis - Exponential Moving Average (EMA)
If we looked at the AVGO share price, it is considered cheap at this point because we can see that it is holding the 200-day period which any further downside would move it below the 200-day.
We can see that RSI is in a weak momentum and trending towards the oversold region, so while AVGO share price might be undervalued, I will be watching the buying demand and the momentum of the overall semiconductor space before I decide to take a position.
Summary
While Broadcom’s Q1 2025 results are speculative, the company’s strategic focus on high-margin software and AI-driven semiconductor demand positions it for potential outperformance.
I think as investors we should monitor execution on VMware integration, AI-related revenue traction, and macroeconomic resilience.
For now, Broadcom remains a compelling play on enterprise infrastructure and AI, albeit with integration and cyclical risks.
Appreciate if you could share your thoughts in the comment section whether you think Broadcom would be able to show a significant result in its strategic AI segment expansion.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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