Broadcom Q2 Earnings Preview: Will AI Demand, Guidance Fuel the Next Leg Higher?

Broadcom (NASDAQ:) Inc. is likely to show robust growth driven by demand for AI-related hardware. The company is set to report earnings on Thursday after the market closes. Analysts anticipate a 20% increase in sales, reaching $15 billion, along with a 43% rise in earnings per share (EPS), which is expected to be $1.57. Investor focus will be on custom AI chip business.

Key Highlights

Broadcom’s custom ASIC business is expected to grow 35% year-over-year to $10.6 billion in fiscal year 2025.
Expansion into new AI customers, such as potentially including Apple (NASDAQ:) and OpenAI, could significantly broaden Broadcom’s addressable market. This growth in the customer base may lead to increased future revenue, as these high-profile clients could drive higher demand for Broadcom’s AI chips and related technologies.
Broadcom’s capability to offer interchangeable XPUs (accelerator processing units) that can replace GPUs in AI processing provides a notable competitive advantage.
Increased competition in the AI chip market could put downward pressure on prices and pose challenges for Broadcom in maintaining its market share. Additionally, since a sizable portion of Broadcom’s AI revenue relies on a few large customers, there is a risk if these customers reduce their orders or choose to switch to other suppliers.

Broadcom 5-yr chart

Source: InvestingPro

AVGO Q2 2025 earnings after market Thursday June 05, 2025

Analyst Ratings
SOURCE	BUY	HOLD	SELL
Refinitiv	38	4	0
TipRanks	27	2	0

Earnings Expectation
EPS	1.57 USD
Revenue	14.96 BUSD

Option Statistics

Put/Call ratio suggests the following three scenarios:

With Put/Call ratio between 1.1614 to 0.5908 for the next four upcoming expiries, suggest that the overall option traders are spread between Puts and Calls, heavy on Put in June 06 expiry.
Lower earnings and guidance could trigger a sharp sell-off.
Better than expected earnings and guidance would trigger a gradual rise. If the guidance is exceptionally better, then AVGO will witness a sharp short-lived rally.
Option market is showing a large net positive Gamma at 272.50 strike versus net negative gamma exposure at 200 strike over the spectrum of June 2025 to December 2027.

In the vast economic landscape, customers display robust spending capacity, sparking a continuous cycle of economic vibrancy. As per a note by Deutsche Bank’s Binky Chadha on Sept. 12, both household and corporate balance sheets stand resilient, marking a departure from historical downturn patterns.

Despite the pointed references to the historically high absolute levels of debt in various news feeds, the critical metric remains the relationship between this debt and its serviceability, a capacity that presently boasts historical strength.

Even though surveys indicate a prevailing pessimism among consumers and business managers, the hard data underscores a different narrative - one of consistent spending patterns, possibly propelled by their sturdy financial foundations.

A Decoupling of the Stock Market from Political Factors

The conventional narrative linking Donald Trump's policy stance to favorable stock market outcomes has hit a snag. Recent observations by RBC’s Lori Calvasina, dated September 23, underscore this break in correlations.

While the divergence may seem unusual, historical instances reveal a similar trend. Despite changes such as corporate tax reforms that initially raised tax rates, businesses managed to recalibrate their strategies, leading to sustainable earnings growth and subsequent stock price appreciation.

The Unyielding Power of Compound Interest

A revelatory insight into market behavior under different presidencies unveils a profound truth - investors who remained steadfast regardless of the political climate outperformed those who based their investment decisions on party affiliations. BlackRock’s Gargi Chaudhuri reinforces this point by emphasizing the unparalleled significance of staying invested in the market, attesting to the magnified benefits of long-term commitment.

U.S. Companies: A Testimony to Success

Borrowing an idea from Mario Draghi’s discourse on European competitiveness, Deutsche Bank’s Jim Reid sheds light on a striking dichotomy between U.S. and European enterprises. The noteworthy absence of a European firm, with a valuation exceeding €100 billion and established in the last 50 years, further accentuates the exceptional growth trajectory of U.S. corporations.

As noted in a previous article on TKer, the U.S. market's superior performance can be attributed to various factors such as a culture of innovation, business-friendly regulations, and robust corporate governance practices.

Exploring Financial Trends Unveiling Financial Insights: A Look into Markets and Earnings

Technical Analysis Perspective

AVGO appears to be in an extreme bullish mode rising along with a sharp 45-degree angle trendline from 138 low in April ’25.
Such rise is pointing at more upside room as long as 252 – 234 support bands remain intact post earnings.
The upside target above this support band is somewhere between 282 – 295 area.
A sharp and sustained move below 234 would damage the bullish sentiments.

Weekly Candlestick Chart

Broadcom Weekly Chart

AVGO Seasonality Chart

AVGO closes 3.7% higher in June 69% of the time since 2009. Though May is the best performing month historically. Stock is trading above 3.7% of the month of June opening price which is around 252.

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Ali Merchant is a seasoned financial market professional with expertise in Technical Analysis, Treasury & Capital Markets, Trading, Sales, Research, Training, Fund & Relationship Management, Fintech, and Digitalization. He is a CMT charter holder and an active member of CMT Association, USA, American Association of Professional Technical Analysts, and CMT Association of Canada. He has worked on various roles and organizations in North America and the GCC, such as ABN Amro bank, Thomson Reuters (NYSE:), Refinitiv, MAK Allen & Day Capital Partners, and Bridge Information Systems.

He is the founder of TwT Learnings, provides financial market training.

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