To The Moon

$Broadcom(AVGO)$ is scheduled to report its fiscal Q3 2025 earnings on Thursday, September 4, 2025, after the market closes.

I am holding Broadcom long-term and in this article I will be sharing the analysis for Broadcom earnings and also how I planned to do an option setup for Broadcom expiration post earnings.

Here is an analysis of what investors and traders should watch for.

Revenue and EPS: The market consensus is for Broadcom to report revenue of around $15.8 billion and adjusted earnings per share (EPS) of $1.66. These estimates represent significant year-over-year growth, driven primarily by strong demand for its AI-related products. Any material deviation from these numbers will be the primary catalyst for post-earnings stock movement.

Summary of Broadcom (AVGO) Fiscal Q2 2025 Earnings

Broadcom (AVGO) delivered a strong performance in its fiscal Q2 2025, with results that showcased its dominant position in both the semiconductor and infrastructure software markets. The company reported record revenue and profitability, primarily driven by robust demand for its AI-related solutions and the successful integration of VMware.

Financial Performance: Broadcom reported revenue of $15.0 billion, a 20% year-over-year increase, meeting analyst expectations. Non-GAAP EPS came in at $1.58, which was also in line with estimates. The company's adjusted EBITDA reached $10 billion, a 35% increase from the prior year, highlighting strong operating leverage.

Segment Drivers:

Semiconductors: Revenue for this segment grew 17% year-over-year to $8.4 billion, with AI-related revenue being the key catalyst. AI semiconductor revenue alone was over $4.4 billion, a 46% increase from the previous year, driven by strong demand for AI networking products.

Infrastructure Software: This segment, which now includes VMware, reported revenue of $6.6 billion, up 25% year-over-year. The strong performance was attributed to the successful transition of customers to the subscription-based VMware Cloud Foundation (VCF) model.

Profitability and Cash Flow: Broadcom demonstrated excellent financial discipline. The company's gross margin was 79.4%, a better-than-guided figure due to a favorable product mix. Free cash flow was a record $6.4 billion, up 44% year-over-year, and the company continued to return capital to shareholders through dividends and share repurchases.

Lessons Learned from the Guidance

Broadcom's guidance for fiscal Q3 2025 and its commentary on the future provided several key lessons for investors.

AI is Not a Cyclical Trend—It’s a New Growth Engine: CEO Hock Tan's commentary emphasized that the growth in AI semiconductor revenue is expected to accelerate, with Q3 guidance pointing to a 60% year-over-year increase. The company's management stated its expectation for this growth rate to "sustain into fiscal 2026." The lesson here is that Broadcom sees AI not as a short-term boom but as a durable, long-term driver of its business, supported by continued and large-scale investment from hyperscale customers.

The VMware Acquisition is Working: The company's guidance and results showed that the controversial acquisition of VMware is paying off. The software business is successfully transitioning to a subscription model, providing a stable, high-margin, and recurring revenue stream. The lesson is that Broadcom's strategy of acquiring and integrating software companies to complement its hardware business is proving to be a successful model for diversifying revenue and improving overall profitability.

Broadcom is More Than Just AI: While AI is the headline, the company's performance and guidance demonstrated that it is a well-diversified technology powerhouse. The non-AI semiconductor business, which has been slower to recover, is showing signs of bottoming out, with segments like broadband and enterprise networking seeing sequential growth. The company's overall strategy is to balance high-growth AI opportunities with its reliable, profitable legacy businesses, reducing its dependency on any single market. This diversification makes it more resilient to economic downturns or shifts in market demand.

Key Metrics to Watch

Broadcom's performance is a bellwether for the semiconductor and infrastructure software sectors, particularly with the explosive growth of artificial intelligence (AI).

AI Revenue Contribution: Investors will be laser-focused on the company's AI-related revenue, which has been a key growth driver. In Q2 2025, AI revenue grew to $4.4 billion, and the company guided for a 60% year-over-year increase in this segment for Q3. Hitting or exceeding this target is critical to justifying the stock's high valuation.

Infrastructure Software Performance: Following its acquisition of VMware, Broadcom's software business has become a significant part of its revenue mix. The company has a target of growing this segment by 16%. Any commentary on the integration of VMware and the adoption of its Cloud Foundation (VCF) by customers will be closely watched.

Guidance for Q4 and Fiscal Year 2026: In the current market, forward guidance often matters more than past results. Broadcom's commentary on its business outlook, particularly for its AI-related chip and networking businesses, will be a major factor. The company's ability to maintain a strong growth trajectory into the next fiscal year will be a key signal for long-term investors.

Broadcom (AVGO) Price Target

Based on 35 analysts from Tiger Brokers offering 12 month price targets for Broadcom in the last 3 months. The average price target is $301.85 with a high forecast of $400.00 and a low forecast of $202.00. The average price target represents a 1.21% change from the last price of $298.24.

Opportunities for Short-Term Trading

The potential for short-term trading opportunities around Broadcom's earnings is high, but so are the risks, largely due to the stock's elevated valuation.

High Valuation and Expectations: Broadcom's stock has seen a massive rally, placing its forward price-to-earnings (P/E) ratio at a premium to the broader semiconductor industry. This means the stock is priced for perfection. A slight miss on earnings, or even just in-line results with cautious guidance, could trigger a sharp sell-off as traders take profits.

Historical Performance: Historically, Broadcom's stock has shown a tendency to move higher after earnings reports. Over the past five years, the stock has experienced a positive one-day return after earnings in 75% of instances. However, this percentage has decreased in the more recent past.

Technical Indicators and Price Action: The stock's recent price action has shown some signs of weakening momentum. Traders should be aware of key technical levels. A strong beat could push the stock to new highs, while a disappointing report could see it fall toward support levels.

Volatility and Options: Options on Broadcom are likely to have high implied volatility leading up to the earnings release, making them expensive. Short-term traders could consider strategies that profit from a sharp move in either direction, such as straddles or strangles, though the high premium on these options presents a challenge. Alternatively, selling out-of-the-money calls or puts could be a strategy if a trader believes the post-earnings move will be less dramatic than the market anticipates.

Here is a bull put spread setup for Broadcom (AVGO) targeting the October 3, 2025 expiration:

Bull Put Spread Setup: AVGO (Broadcom) – Exp. Oct 3, 2025

Strategic Rationale

• Bullish Bias: You're betting AVGO stays above $270 by expiration.

• Defined Risk: Max loss is capped at $8.87 per spread.

• High IV: Implied volatility is elevated (~66–68%), which boosts premium intake.

• Convexity Play: This setup offers a favorable risk/reward if AVGO stabilizes or rallies post recent drawdown.

Tactical Overlay Ideas

• Layer in volatility cone analysis to assess reversion potential.

• Use sector rotation dashboards to confirm tech/semis strength.

• Consider rolling up/down if AVGO breaks key technical levels (e.g., 50-day MA or RSI divergence).

In conclusion, while Broadcom's core business remains strong and the long-term outlook appears positive, the high expectations and valuation make its upcoming earnings report a high-risk, high-reward event for short-term traders.

Summary

Broadcom (AVGO) is set to report its fiscal Q3 2025 earnings on September 4, 2025. The key metrics to watch are revenue and earnings per share (EPS), with consensus estimates at around $15.8 billion and $1.66, respectively.

Crucially, investors will be focused on the company's AI-related revenue and the performance of its infrastructure software segment, which includes VMware. Analysts are looking for continued acceleration in AI revenue, with guidance for a 60% year-over-year increase. Any deviation from this target could significantly impact the stock.

For short-term traders, the stock's high valuation and recent rally make it a high-risk, high-reward proposition. While a strong beat could push the stock higher, a slight miss or cautious guidance might lead to a sharp correction as traders take profits. The high implied volatility in options premiums also makes trading around the event more complex.

Appreciate if you could share your thoughts in the comment section whether you think Broadcom could provide an earnings beat with strong contribution from AI revenue.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.