TLDR
- Broadcom stock closed at $297.39 on August 29, down 3.65% ahead of Q3 results
- Company projects 21% YoY revenue growth to $15.82B and $1.66 EPS
- AI segment revenue surged 46% in Q2, projected to reach $5.1B in Q3
- NVIDIA partnership strengthens AI infrastructure for private cloud customers
- Free cash flow of $6.4B supports dividends, buybacks, and post-VMware debt
Broadcom Inc. (NASDAQ: AVGO) closed at $297.39 on August 29, down 3.65%, with investors turning their attention to the company’s upcoming quarterly earnings report on September 4.
Despite the stock’s dip, expectations remain high for continued AI-driven growth, as the company projects 21% year-over-year revenue growth to $15.82 billion and earnings per share of $1.66.
AI Business Becomes Core Growth Driver
The spotlight remains firmly on Broadcom’s artificial intelligence segment. In the second quarter, AI revenue surged 46% year-over-year to $4.4 billion, with the company projecting $5.1 billion in Q3, representing about 33% of total revenue. If achieved, this would mark the tenth consecutive quarter of AI growth, underscoring its role as a central pillar of Broadcom’s expansion strategy.
Non-GAAP gross margin stood at 79%, while adjusted EBITDA margin reached 67% in Q2, highlighting Broadcom’s efficient cost management. However, Q3 guidance signals a slight contraction to 66%, sparking concerns that peak growth may be approaching. Still, even with margin pressure, Broadcom remains at the higher end of industry profitability.
NVIDIA Partnership Expands Private Cloud AI
Broadcom is advancing its NVIDIA collaboration by integrating the latest GPU and networking technology into VMware Cloud Foundation (VCF). This partnership gives enterprises the ability to deploy next-generation AI models within private cloud environments, blending NVIDIA’s Blackwell GPUs, RTX PRO 6000 Server Edition, and ConnectX-7 NICs with VMware’s trusted virtualization features.
The integration also supports AI model training, inference, and generative AI workloads with improved efficiency, while maintaining VCF’s core enterprise-grade reliability through features like vMotion, High Availability, and Distributed Resource Scheduler. This strategy enables Broadcom customers to scale AI workloads alongside existing enterprise applications without disruption.
Financial Strength Supports Flexibility
Broadcom’s strong $6.4 billion Q2 free cash flow — part of $22.6 billion over the past 12 months — continues to support dividends, share buybacks, and debt reduction tied to the $69 billion VMware acquisition. This cash flow strength reinforces Broadcom’s ability to navigate both its AI investments and broader strategic moves without compromising shareholder returns.
Performance vs. S&P 500
Broadcom has outperformed the broader market by a wide margin across all timeframes:
- YTD Return: +28.96% vs. S&P 500’s +9.84%
- 1-Year Return: +91.66% vs. +15.53%
- 3-Year Return: +512.86% vs. +60.28%
- 5-Year Return: +872.15% vs. +84.16%
This performance reflects investor confidence in Broadcom’s ability to drive sustained growth from its AI and semiconductor businesses, while leveraging strategic acquisitions like VMware.
