"Broadcom ( NASDAQ: AVGO) straddles two engines heading into results: accelerating AI semiconductors and a fast-maturing VMware subscription base. Last quarter, AVGO delivered a modest EPS beat and reiterated that AI demand-especially networking and custom XPUs-will carry through 2026, while software ARR expands with VCF conversions. Broadcom has beat analyst expectations over the past 4 quarters and the share price, up 62% in the past 6 months, reflects that outperformance."
"Key Areas to Watch AI trajectory: XPUs + Ethernet networking - Management now expects the 2025 AI growth pace to sustain into 2026, with inference adding on top of training. Watch XPU ramp, lead-times, and the AI networking mix (about 40% of AI revenue last quarter, expected to trend below 30% longer-term). Tomahawk 6 and scale-up Ethernet - The new 102.4 Tbps Tomahawk 6 enables larger, flatter AI clusters; management sees strong interest as Ethernet increasingly addresses scale-up too. Timing of customer POCs to orders matters."
AI semiconductors and Ethernet networking are primary growth drivers, with Q3 AI revenue guided to $5.1B and networking remaining pivotal. VMware VCF conversions exceed 87% among top customers, boosting software ARR as subscription renewals progress. Wall Street consensus projects FY25 revenue of $62.8B and EPS of $6.67, rising to about $76.2B revenue and $8.30 EPS in FY26. Management expects 2025 AI growth momentum to sustain into 2026, with inference adding to training. New products like the 102.4 Tbps Tomahawk 6 target larger, flatter AI clusters and increased scale-up Ethernet demand.
Read at 24/7 Wall St.
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