Broadcom expected to highlight AI segment in Q3 earnings

Broadcom (NASDAQ:AVGO) will likely highlight the growing revenue from its artificial intelligence segment, as well as from its WMware acquisition, when it releases its third quarter fiscal 2024 results on Thursday after the markets close.

Broadcom is expecting year-over-year revenue growth of 15% for the quarter.

“This growth is largely driven by the integration of VMware and the increasing demand for AI products,” according to Seeking Alpha analyst Oliver Rodzianko. “Furthermore, the AI segment is a significant driver of Broadcom’s growth, with expectations that its AI-related revenues could reach $10B in 2024, which is up from $4.2B in 2023. This trend in AI demand is also supporting its partnerships with major tech companies for custom AI chips.”

Rodzianko rates Broadcom at Hold at this point due to its high valuation.

However, Seeking Alpha analyst Victor Dergunov gives Broadcom a Buy rating ahead of the upcoming financial results.

“Broadcom provides market-leading AI networking and connectivity solutions, revolutionizing the industry,” he said. “Broadcom has significant growth potential in the lucrative AI enterprise market.”

“Broadcom should have another solid quarter, likely making its stock a strong buy going into earnings, as well as a solid buy in the intermediate and long term,” he added.

Broadcom shares spiked to more than $180 in June, but have since moderated.

Meanwhile, Seeking Alpha analyst Hunting Alpha, who also rates Broadcom at Buy, expects significant growth from VMware.

“I anticipate VMWare’s growth to outpace that of the overall company in the upcoming quarters,” Hunting Alpha said in a recent analysis. “Currently, VMware is ticking at a quarterly run-rate of $2.7B, posting a sequential growth of 30% QoQ in the latest quarter.”

Broadcom has a Buy rating from Seeking Alpha analysts and Wall Street analysts. However, it has a Hold rating from Seeking Alpha’s Quant system.

When Broadcom releases its financial results on Sept. 5, the consensus estimate calls for adjusted earnings per share of $1.20 on revenue of $12.96B.

Last quarter, Broadcom beat the earnings per share estimate by $0.01, but surpassed the revenue estimate by nearly half-a-billion dollars.