Broadcom Q3 Earnings Preview: Can AVGO Continue to Outperform the Market?
Broadcom Q3 Earnings Preview: Can AVGO Continue to Outperform the Market?
- Broadcom to report Q3 earnings on Thursday, September 4, after the market close.
- AI growth is expected to remain robust, benefiting Broadcom’s bottom line.
- The options market expects a +/- 18.23 point move, or 6% of Wednesday’s stock price.
Broadcom earnings to cross the wires on Thursday, September 4, amid market indecision
Broadcom (AVGO) is scheduled to report earnings on Thursday, September 4, after the market close. Management will hold a conference call after the results cross the wires.
The stock has rallied over 100% from its 2025 low that it hit back in April amid the broader market pullback sparked by Trump’s trade war. That performance nearly doubles the gains seen in the broader chip space, with the VanEck Semiconductor ETF (SMH) rallying 67% over the same period. The stock was on track to close 1.2% higher on Wednesday, outpacing gains in the S&P 500 and Nasdaq 100.
Broadcom has greatly benefited from the boom in the artificial intelligence space. Revenue grew by 20% from a year prior in its second quarter report, with its AI semiconductors leading its growth, which reached $4.4 billion in Q2, a 46% increase from the year before.
Its infrastructure software segment saw a boost from the VMware acquisition and adoption of its cloud foundation. AI networking was another strong performer, growing over 170% year-over-year in Q2. The company projected semiconductor revenue to hit $5.1 billion in Q3.
Analysts expect AI spending to increase over the next five years, with total spending jumping to as high as $4 trillion, according to Nvidia (NVDA). Meta Platforms (META), one of Broadcom’s customers, expects to ramp up spending on AI next year under a new strategy for the company.
OpenAI announced an increased size for its secondary share sales that put the company at a valuation of $500 billion, up from $300 billion just earlier this year. For now, all signs are pointing to a quickly accelerating market for AI, which should benefit Broadcom. Investors will want to hear positive guidance from management in addition to numbers that beat expectations.
What do investors expect?
Analysts see Broadcom’s Q3 revenue coming in at $15.83 billion. Earnings per share (EPS) are projected at $1.66, according to TradingView. That would compare to revenue of $13.07 billion and an EPS of $1.24 a year ago. Last quarter, revenue came in at $15 billion on $1.58 per share.
Analysts are mostly bullish on the stock, with 44 buy and strong buy ratings, 3 hold ratings and only 1 sell rating. The average one-year price target was at 309.48, which represents a 3% increase from Wednesday’s 300.19 stock price. The high estimate sits at 400, or a 33% increase from the current price.
Trading AVGO earnings
Broadcom traded with an implied volatility rank (IVR) of 24.9 on Wednesday. The options market shows an expected move of +/-18.23 points, or 6.08% of the current stock price. That move aligns within the average 5% to 10% post-earnings move for S&P 500 companies.
Technically, Broadcom remains in a strong position. It managed to bounce off of its 50-day simple moving average (SMA) earlier this week following a pullback and subsequently rose to reclaim its place above the 21-day exponential moving average (EMA).
Traders wanting to take on some long exposure to earnings may benefit from selling a put or call spread just outside the expected move. For example, Tuesday’s low of 287 is 13 points below the current market price and coincides with the rising 50-day SMA. Selling a put spread with the short option at 287.5 and the long at 285 would give a probability of profit (POP) of 71% with a max profit of 73 and max loss of 177.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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