Semiconductor tech giant Broadcom (AVGO) continues to soar, with shares up almost 95% since last year and hovering near record highs. The rally reflects its expanding role in AI infrastructure build-outs and a stronger software portfolio following the VMware acquisition. More specifically, AVGO has achieved record revenues of $15 billion in Q2 2025, while AI semiconductor revenue rose 46% over the past twelve months. Even when taking into account aspirational AI demand expectations, AVGO’s trajectory is a marvel.
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For analysts and current shareholders, the next key operational milestone is a 60% rise in AI semiconductor revenue. If confirmed, AVGO is widely expected to breach its glass ceiling of $300 per share — the stock’s all-time high.
With the stock already priced for perfection, the key question is whether growth can keep pace with expectations. Bullish sentiment is elevated, and hyperscaler CAPEX trends can swing sharply quarter to quarter. Still, the overall playbook remains intact ahead of Thursday night’s report, and the trading setup appears opportunistic for both short-term scalpers and long-term value seekers alike.
Why the Bar is High for Broadcom
When a stock hovers near record highs, “good” results can feel underwhelming. In June, Broadcom guided Q3 revenue to roughly $15.8 billion—above consensus at the time—but the conversation quickly shifted to how sustainable growth looks at a premium multiple. AI exposure is a strength, yet it ties Broadcom closely to a handful of hyperscalers whose capex cycles can swing sentiment. Recent volatility in AI chip peers on spending headlines underscores just how sensitive investors are to demand signals.
Meanwhile, VMware integration remains a key subplot. The acquisition adds a second growth engine with recurring, high-margin software, but execution is under close watch as customers adopt VMware Cloud Foundation (VCF) and Private AI Services. While early product traction is encouraging, markets want proof in revenue mix and contract renewals, not just demos. That scrutiny explains why even beat-and-raise quarters can trade sideways unless management clearly links product momentum to financial outcomes.
Valuation Blues on the Horizon for AVGO
Considering AVGO’s rapid ascent in recent weeks and months, the stock’s valuation has understandably ballooned. The tech giant’s GAAP P/E ratio is now ~108 compared to a sector average of 29. On a non-GAAP basis, AVGO’s P/E ratio falls to 51 while the sector average is 23. On both measures, AVGO stock could be considered overvalued in relation to its earnings.
AVGO stock also carries a substantial premium on a forward-looking basis. The company’s forward P/E ratio is ~66 compared to a sector average of 29. Such valuations should remind investors that even excellent stocks can often endure sharp pullbacks as valuations reach extreme levels.
What Market Participants are Expecting This Thursday
Street models indicate revenue of roughly $15.80–$15.83 billion (~21% growth) and adjusted EPS of nearly $1.66, up ~34% year over year. Those marks line up with Broadcom’s very own outlook, so the market will likely focus on the forward-looking guidance once again. In fact, for Q4, consensus estimates project $17 billion in revenue if demand remains firm, marking a strong sequential acceleration. In any case, the Q4 outlook will shape how investors interpret AVGO’s report.
For those still unaware of how Broadcom generates revenue, the tech powerhouse operates two pillars. First, AI semiconductors: management guided to roughly $5.1 billion of Q3 AI semi revenue, driven by custom accelerators and high-speed Ethernet shipped into the big clouds.
And then, VMware, as Broadcom has been seeding VCF 9.0 with “AI-native” capabilities, including Private AI Services, which strengthen the case for on-premises and hybrid AI deployments within regulated and cost-sensitive enterprises. If attach rates hold and deployments widen, the blend of AI hardware plus recurring software should keep the top line firm.
Broadcom’s Impressive Profit Generation
Profitability remains the other pillar of the Broadcom story. Consensus expects Q3 EPS of roughly $1.66 (+34% year-over-year), with analysts modeling even faster growth in Q4 as AI shipments scale and software leverage takes effect. Last quarter reinforced that thesis as revenue climbed 20% year-over-year to $15 billion, adjusted EBITDA hit $10 billion (two-thirds of sales), and free cash flow reached a record $6.4 billion—ample to fund growth while returning capital.
Valuation is the tension point, but also the reward if execution continues. At nearly 45x this year’s EPS, the stock looks expensive on the surface, yet not unreasonable for a business compounding sales near 20% with resilient margins and a sturdier software base.
That sets up a fairly binary post-earnings trade. Deliver ~$15.8 billion in revenue, ~$1.66 in EPS, and constructive Q4 commentary (the ~$17 billion narrative), and the multiple should hold. Miss on visibility, however, and shares could wobble even on a headline beat.
Is Broadcom a Buy, Sell, or Hold?
Wall Street remains very bullish on Broadcom, despite its prolonged rally, with the stock carrying a Strong Buy consensus rating based on 27 Buy and two Hold recommendations over the past three months. In the meantime, AVGO’s average stock price target of $313.63 suggests ~5.5% upside from current levels.
Broadcom Must Deliver to Defend Lofty Valuation
Broadcom’s earnings story is simple to outline but difficult to deliver: sustain AI momentum, show VMware progress in revenue terms rather than product demos, and protect margins while operating at hyperscale. Management has provided clear markers—AI semiconductor revenue near $5.1 billion, Q3 sales around $15.8 billion, and EPS close to $1.66. If those fall into place and Q4 trends toward ~$17 billion, the stock’s lofty levels look defensible, and the long-term compounding thesis into FY26 remains intact, even in a market demanding constant proof.
That said, it’s a challenging setup. Waiting for a pullback hasn’t worked over the past year, but at current valuations, even a modest stumble in the growth narrative could deal a real blow to the bullish case.