Broadcom (AVGO): Price Target Hikes and Q4 Earnings Preview

Why This Matters: Broadcom's focus on AI infrastructure and strategic partnerships positions it for continued growth. The increasing demand for AI accelerators and networking solutions will likely drive future revenue and profitability.

Broadcom (AVGO Quick Quote AVGO - Free Report?ref=yanuki.com) is set to release its Q4 fiscal 2025 earnings, with expectations of $17.4 billion in revenue, a 24.5% increase from the previous year. A key driver is the growth in AI revenues, projected to increase by 66% to $6.2 billion, spurred by custom AI accelerators (XPUs).

Broadcom's expanding AI portfolio includes the Jericho 4 Ethernet fabric router, capable of interconnecting over one million XPUs across multiple data centers, and Thor Ultra, an 800G AI Ethernet Network Interface Card. These innovations cater to the accelerating demands of AI networking. The company also launched Wi-Fi 8 silicon solutions for the broadband wireless edge ecosystem.

However, Q4 guidance indicates a potential 70-basis-point sequential decline in gross margin due to a higher mix of lower-margin XPUs. Non-AI semiconductor revenues are expected to see low double-digit sequential growth, driven by broadband, server storage, and wireless improvements, offset by a decline in enterprise networking.

Despite this, Broadcom's long-term prospects remain strong, benefiting from the growing demand for AI infrastructure and its VMware integration. The launch of VMware Cloud Foundation 9.0 allows enterprises to run AI workloads on virtual machines and containers, offering an alternative to public cloud solutions.

AVGO shares have significantly outperformed the Computer and Technology sector, with a 118% return in the trailing 12-month period.

Broadcom's revenue growth is primarily driven by strong performance in AI semiconductors and the integration of VMware.

AI revenues are expected to grow significantly, with projections of a 66% year-over-year increase in Q4 2025.

Key AI products include custom AI accelerators (XPUs), Jericho 4 Ethernet fabric router, and Thor Ultra 800G AI Ethernet Network Interface Card.

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