Broadcom Earnings Preview: Focus on Guidance and Full-Year AI Revenue Target
Taylor Wilson
Broadcom reports Q2 results after today's close. Wall Street expects revenue of $22.04 billion, up 47% year-over-year, but the real test is Q3 guidance and the full-year AI revenue target — AI is growing at 140% and reshaping the company's valuation story.
Q2 numbers are priced in — what is the market actually waiting for?
Wall Street expects Q2 revenue of $22.04 billion (+47% YoY) and EPS of $2.39 (+51% YoY).
But the stock has already rallied roughly 36% since last quarter's report, well ahead of the S&P 500. This means → the Q2 "beat" is likely priced in; the market is trading next quarter's slope and the full-year trajectory.
HSBC forecasts Q3 revenue at $30.7 billion, up ~40% sequentially, about 7% above consensus. In plain terms = if Q3 guidance comes in below that number, the stock could sell off despite a strong Q2.
Why can AI revenue growth hit 140%?
Q1 AI semiconductor revenue was $8.4 billion (+106% YoY); Q2 AI revenue is expected at $10.7 billion, implying 140% YoY growth.
Broadcom has locked in long-term ASIC — custom AI chips built for a specific client — orders with six leading AI companies including Google, Meta, Anthropic, and OpenAI. Total backlog stands at $73 billion, contracted through 2028.
This reflects a structural shift: top cloud operators are moving from "buy general-purpose GPUs" to "commission bespoke silicon," and Broadcom holds the densest order book on that path.
What's inside the order book?
Google TPU — Google's in-house AI chip — orders alone total roughly 6.5 million units, the single largest customer by volume.
The pipeline also spans Meta's five-generation MTIA ASIC roadmap, OpenAI's second-gen ASIC, an XPU ASIC for an Asian hyperscaler, and Apple AI CPU/XPU ASICs.
UBS analyst Timothy Arcuri noted that Broadcom recently shifted some Anthropic-related orders toward a more standardized ASIC layout. This means → a modest near-term revenue headwind, but standardization spreads R&D costs and lifts margins.
Ethernet chips and margins — where's the catch?
The next-gen Tomahawk 6 switch chip uses 3 nm process technology with 102.4 Tbps throughput. Capacity for next year is nearly sold out; JPMorgan expects a clear shipment inflection in the second half of next year.
But a rising hardware mix creates structural margin pressure: hardware carries lower margins, and HSBC expects Q3 non-GAAP gross margin to edge down to 74.4%.
In plain terms = the more chips Broadcom sells, the faster revenue grows — but each dollar of revenue yields a thinner slice of profit. Revenue growth ≠ proportional profit growth.
What are JPMorgan and HSBC projecting long-term?
Both banks expect Broadcom's FY2027 AI revenue to reach the $60 billion range — roughly three times the current run rate.
JPMorgan simultaneously raised its AI forward-backlog estimate from over $120 billion to over $150 billion.
This means → Wall Street is already pricing Broadcom on AI revenue two years out. Any shift in management's wording on the full-year AI target tonight will be parsed word by word.
Analysts are overwhelmingly bullish — is there any dissent?
The consensus rating among 30 Wall Street analysts is "strong buy" — 26 buys, 4 holds, zero sells, an 86.7% buy ratio.
Target-price range: Citi $500, Goldman Sachs $500, Wells Fargo $545, JPMorgan $500, HSBC $600, UBS $490. The average is $478.56, implying roughly 12.76% upside from the current price.
Wall Street is also tracking the integration of the $69 billion VMware acquisition. This reflects a broader question: can Broadcom wring higher margins from its software assets, not just its chip franchise?
Content is for reference only, not financial advice.