Broadcom Q2 Earnings Preview: AI-Related Revenue In Focus, Will Partnerships With Meta, Google Shine Through In Results, Guidance?

Semiconductor company Broadcom Inc AVGO is set to report second-quarter financial results after market close Wednesday, June 12.

Here are the earnings estimates, what analysts are saying and key items to watch ahead of the report.

Earnings Estimates: Analysts expect Broadcom to post second-quarter revenue of $12.03 billion according to data from Benzinga Pro.

The company reported $8.73 billion in revenue in last year's second quarter. Broadcom has beaten analysts' estimates for revenue in nine of the last 10 quarters.

Analysts expect the company to report earnings per share of $10.84 for the second quarter compared to $10.32 in last year's second quarter. The company has beaten analysts' estimates for earnings per share in 10 straight quarters.

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What Analysts Are Saying: Broadcom's growth in the artificial intelligence sector and upside synergies from the acquisition of VMWare led to Morgan Stanley analyst Joe Moore resuming an Overweight rating on the stock.

The analyst, who has a $1,658 price target, said Broadcom is one of the strongest AI plays.

Moore said Broadcom is set to grow faster than many other AI alternatives.

Bank of America analyst Vivek Arya expects Broadcom to report a beat in the second quarter on Wednesday.

The analyst, who has a Buy rating and $1,680 price target, said strength in AI could offset headwinds in the company's legacy businesses.

JPMorgan analyst Harlan Sur recently highlighted deals for Broadcom with Alphabet Inc GOOGGOOGL and Meta Platforms Inc. META.

The partnerships are helping Broadcom estimate that its AI-related revenue will reach $11 billion in 2024.

Sur said Broadcom could have over $12 billion in AI-related revenue in 2024 and $14 to $15 billion or more in 2025.

The analyst, who has an Overweight rating and $1,700 price target, said Broadcom is the top market share leader in custom (ASIC) chip designs.

Here are other analyst ratings on Broadcom and their price targets:

Citigroup: Buy rating, $1,560 price target

Jefferies: Buy rating, lowered price target from $1,616 to $1,550

Barclays: Overweight rating, raised price target from $1,405 to $1,500

Key Items to Watch: The AI-related revenue, as mentioned by analysts above, will likely be the key item for investors to watch in the second-quarter results.

"We are pleased to have two strong drivers of revenue growth for Broadcom in the first quarter and fiscal year 2024. First, our acquisition of VMware is accelerating revenue growth in our infrastructure software segment, as customers deploy VMware Cloud Foundation,” Broadcom CEO Hock Tan said after first-quarter results. “Second, strong demand for our networking products in AI data centers, as well as custom AI accelerators from hyperscalers, are driving growth in our semiconductor segment."

The company's guidance will be another area analysts and investors are watching. The company is guiding for a full-year 2024 revenue of $50 billion. With the added excitement of AI-related revenue, some may expect a raise to the estimates for the full year after a strong first-quarter report and continued momentum in the second quarter.

One area of concern to watch on is AI chip export restrictions, which could impact Broadcom and other semiconductor stocks.

AVGO Price Action: Broadcom shares trade at $1,442.58 on Tuesday at publication versus a 52-week trading range of $795.09 to $1,454. Broadcom stock is up 69% in the last year and up 29% year-to-date in 2024.

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