Will Higher Semiconductor Revenues Help AVGO Stock Beat Q3 Earnings?

Core Insights - Broadcom's third-quarter fiscal 2025 results are expected to show significant growth driven by expanding AI offerings, particularly in the Semiconductor segment, with AI revenues increasing 46% year over year to $4.4 billion in Q2 2025 [1][9] - The demand for AI networking solutions surged 170% year over year, accounting for 40% of total AI revenues in Q2 2025, highlighting the strong market for Broadcom's Ethernet-based AI networking solutions [2][9] - Broadcom anticipates a 25% year-over-year increase in semiconductor revenues to $9.1 billion and a 60% surge in AI revenues to $5.1 billion for the fiscal third quarter [3] Semiconductor Segment - The Zacks Consensus Estimate for Semiconductor revenues is projected at $9.114 billion, reflecting a growth of 25.3% compared to the previous year [3] - The operating income for the Semiconductor segment is estimated at $5.152 billion, indicating a 27.5% increase year over year and a 7.2% sequential growth [7] Infrastructure Software Segment - The Infrastructure Software segment is expected to benefit from VMware's growing traction, with revenues estimated at $6.7 billion, representing a 15.6% year-over-year growth [5][4] - The operating income for Infrastructure Software is projected at $5.048 billion, implying a 29.2% increase from the previous year but only a 1.2% sequential growth [7] Margin Considerations - Despite the growth in sales of lower-margin XPUs, Broadcom expects a decline in gross margin by 130 basis points sequentially, with an adjusted EBITDA margin forecasted at 66%, suggesting a 70-basis point decline [6]