Broadcom's Q2: Get Ready For An AI Eruption

(10min)

Summary

  • Since my March 2024 article, AVGO stock soared 44%, crushing the S&P 500. I'm now reiterating my "Buy" before Broadcom's Q2 FY25 earnings.
  • Broadcom's Q1 AI revenue soared ~77% YoY ($4.1B), fueling a strong beat. CEO eyes expanding AI SAM beyond $75B with new hyperscaler engagements, guiding Q2 AI up 44%.
  • VMware software transition boosts margins. Recovering broadband and growing server storage, plus strong Q1/Q2 bookings, signal a robust 2H 2025 for non-AI segments.
  • Strong FCF ($6B Q1) supports growth. While FWD multiples are high, consistent EPS beats could yield an attractive FY27 P/E of ~23.5x, indicating undervaluation.
  • Expecting a Q2 FY25 earnings beat, driven by AI momentum and non-AI recovery. Recent analyst uncertainty creates a "nice soil" for AVGO to surprise investors.

Broadcom

G0d4ather

My Coverage History

I initiated my investment coverage of Broadcom (NASDAQ:AVGO) stock in March 2024 with a "Buy" rating, which I haven't changed ever since, even as the stock price started to fall like a rock during Q1 this year. Moreover, my

This article was written by

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Oakoff Investments is a personal portfolio manager and a quantitative research analyst with 5 years helping readers find a reasonable balance between growth and value by sharing proprietary Wall Street information.

He leads the investing group Beyond the Wall Investing with features that include: a fundamentals-based portfolio, weekly analysis on insights from institutional investors, regular alerts for short-term trade ideas based on technical signals, ticker feedback by request from readers, and community chat. Learn more.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of AVGO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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