Broadcom(US:AVGO)2025-08-31 16:21Summary of Broadcom Inc (AVGO) Earnings Preview Company Overview - Company: Broadcom Inc (AVGO) - Industry: Semiconductor solutions for wired infrastructure and wireless communications - Headquarters: San Jose, CA, and Singapore - Employees: Approximately 15,000 Key Points Earnings Expectations - Broadcom is expected to report F3Q25 results on September 4, with anticipated sales exceeding consensus estimates of $15.8 billion, reflecting a 6% quarter-over-quarter increase driven by strong AI sales [1][2] - The expected gross margin is 77.5%, above the consensus of 77.1%, with an EPS forecast of $1.35, slightly above the consensus of $1.32 [2][3] AI Business Growth - AI sales are projected to grow 60% year-over-year to $19.5 billion in F25 and 37% year-over-year to $26.7 billion in F26, with significant contributions from major customers including Google, Meta, and Bytedance [5][20] - Broadcom is ramping up production with three hyperscale customers and has four additional prospects in the pipeline, including OpenAI and Apple [5][20] Non-AI Semiconductor Business - The non-AI semiconductor business, which constitutes 27% of F25E sales, has seen a decline of approximately 40% from its peak but is expected to recover, helping to offset gross margin dilution from the AI segment [1][25] Revenue and EPS Estimates - Revenue and EPS estimates for F25 have been raised from $61.7 billion and $5.27 to $62.7 billion and $5.37, respectively, due to higher AI and wireless revenue [6][27] - For F26, estimates have been adjusted from $67.5 billion and $6.03 to $72.0 billion and $6.46 [6][27] Market Position and Valuation - The price target for Broadcom is reiterated at $315.00, reflecting a valuation of 41X F27E EPS, which is at the high end of its recent trading range [7][29] - The company is noted for its strong AI business and potential multiple expansion across its peer group [7][29] Risks - Key risks include dependency on major customers like Apple, potential margin pressures from increased AI revenue, and competition within the semiconductor market [33][34] Additional Insights - The wireless business is expected to see upside due to stronger-than-expected iPhone sales from Apple, with a forecasted 24% quarter-over-quarter increase in F4Q25 [24] - Broadcom's long-term SG&A target is under 3% of revenue, which is among the lowest in the semiconductor industry [34] This summary encapsulates the critical insights and projections regarding Broadcom Inc's performance and market positioning, highlighting both opportunities and risks within the semiconductor industry.