Can Broadcom's Expanding Portfolio Push Up Q4 Semiconductor Sales?

Broadcom’s AVGO Semiconductor revenues are benefiting from strong demand for XPUs (65% of AI revenues in the third quarter of fiscal 2025), which are a type of application-specific integrated circuit (ASIC) necessary to train Generative AI (Gen AI) models. The company’s expanding portfolio is expected to boost Semiconductor sales further in fiscal 2025.

In June, AVGO announced the shipment of its Tomahawk 6, the world’s first 102.4 terabits per second (Tbps) Ethernet switch. On Oct. 8, Broadcom announced that it has started shipping Tomahawk 6 – Davisson (TH6-Davisson), its third-generation Co-Packaged Optics Ethernet switch. In mid-July, AVGO announced shipping of Tomahawk Ultra, its Ethernet switch, which achieves 250ns switch latency at full 51.2 Tbps throughput. Tomahawk Ultra delivers line-rate switching performance even at minimum packet sizes of 64 bytes, supporting up to 77 billion packets per second. 

In August, Broadcom announced the Jericho 4 Ethernet fabric router that has the ability to interconnect more than one million XPUs across multiple data centers. Last week (Oct. 14), Broadcom announced Thor Ultra, the industry’s first 800G AI Ethernet Network Interface Card (NIC), capable of interconnecting hundreds of thousands of XPUs to drive trillion-parameter AI workloads. AVGO also announced the industry’s first Wi-Fi 8 silicon solutions for the broadband wireless edge ecosystem, including residential gateways, enterprise access points and smart mobile clients.

AVGO now expects fourth-quarter fiscal 2025 AI revenues to jump 66% year over year to $6.2 billion, driven by these factors. Semiconductor revenues are anticipated to grow 30% year over year to $10.7 billion. The Zacks Consensus Estimate for Semiconductor sales is pegged at $10.76 billion, indicating 30.8% growth from the figure reported in the year-ago quarter.

AVGO Faces Tough Competition in the Semiconductor Market

Broadcom is a major player in the semiconductor market, but is facing stiff competition from NVIDIA NVDA and Marvell Technology MRVL.

NVIDIA is benefiting from the strong growth of AI and high-performance computing (HPC). Escalating demands of AI compute clusters necessitate high efficiency and low latency networking, and NVIDIA benefits from an innovative portfolio. Networking revenues jumped 98% year over year and 46% sequentially to $7.3 billion in the second quarter of fiscal 2026. Strong demand across Spectrum- X Ethernet, InfiniBand and NVLink is expected to drive NVIDIA’s top-line growth.

Marvell Technology’s Cloud and on-premise Ethernet switching serves the data center end-market that accounted for 74% of net revenues in the second quarter of fiscal 2026. Marvell Technology is benefiting from strong data center demand and expanding relationships with hyperscalers. It is designing scale-up switches that support both open standard Ethernet and UALink fabrics, purpose-built for AI, driving up growth prospects.

AVGO’s Share Price Performance, Valuation & Estimates

Broadcom shares have appreciated 47.8% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 24.5%.

AVGO Stock Outperforms Sector

The AVGO stock is trading at a premium, with a forward 12-month price/earnings of 37.83X compared with the broader sector’s 29.41X. Broadcom has a Value Score of D.

AVGO Stock has a Stretched Valuation

The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $6.73 per share, up by a penny over the past 30 days, suggesting 38.2% growth from fiscal 2024’s reported figure.
 

Broadcom Inc. Price and Consensus

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

Broadcom currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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