Broadcom (AVGO) Earnings Live: What To Expect From 2Q Results

Despite strong momentum, Broadcom’s Q2 setup is not without potential downside risks. The most immediate is hyperscaler AI capex cyclicality. While demand remains strong, cloud buildouts can be lumpy, and any signal of Q3 digestion or budget reallocation — especially in networking — could imply slower sequential growth, even if the long-term trajectory remains intact.

On the software side, customer churn within VMware remains a meaningful risk. Broadcom’s go-to-market changes — including consolidation of SKUs and tighter bundling — could alienate long-time customers, especially in segments like EUC (End-User Computing) that are being divested or deemphasized. If bookings slow or renewal rates dip below plan, the market may question whether VMware revenue is truly durable.

Another issue is regulatory scrutiny and deal pipeline constraints. Broadcom has long relied on M&A to build scale and pricing power. But with global regulators now increasingly aggressive, further transformative acquisitions could face long timelines or outright rejection, limiting long-term inorganic growth potential.

Finally, valuation has expanded significantly. The stock trades at ~25x forward EPS — toward the high end of its historical range. That leaves limited room for error on the Q2 results or full-year guide. If margins contract, or if guidance remains unchanged despite tailwinds, the bar may prove too high.

1. GenAI Ethernet Momentum and ASP Trends:
The durability of Broadcom’s AI networking tailwind is the single most important question heading into this release. Investors want to know if demand from hyperscalers is accelerating, stabilizing, or softening — and whether AVGO is gaining share vs. InfiniBand-based alternatives like Nvidia’s Mellanox stack. A beat in networking and bullish comments on demand visibility into 2H FY24 would reinforce Broadcom’s role as a backbone infrastructure supplier for AI training and inference clusters.

2. VMware Margins, Churn, and Booking Signals:
While headline growth will be boosted by VMware consolidation, investors care more about how profitable those dollars are. If VMware segment operating margin exceeds 60% or gross margin trends toward the high-70s, the software synergy thesis gains credibility. Watch closely for commentary on customer renewals, Net Revenue Retention (NRR), and any soft patches in product overlap areas.

3. Guidance Lift and Fiscal Discipline:
Management has guided conservatively over the past year, often beating internally restrained expectations. If Broadcom raises its full-year revenue outlook to $51B or above and holds EBITDA margin at 60%, it would confirm confidence in both software execution and sustained AI spend. That could justify further multiple expansion in the mid-20x EPS range.

Q2 FY2024 Street Estimates:

• Revenue: $12.04B

• Adjusted EPS: $10.84

• YoY Revenue Growth: +37.6%

• Adj. Gross Margin (guide): ~75%

• Adj. EBITDA Margin (guide): 60%

FY24 (Implied):

• Full-Year Revenue Guide (prior): $50B

• AI Infrastructure Run-Rate (last disclosed): $1B/quarter

• VMware Contribution Estimate (Q2): ~$2.3B

• Legacy Semiconductor Core (ex-VMware): ~$9.7B

Broadcom has beaten Street EPS estimates in each of the last 12 quarters. Last quarter, it reported EPS of $10.99 on $11.96B in revenue, exceeding guidance on both lines and attributing the strength primarily to AI-related Ethernet demand and an unexpectedly smooth start to VMware integration.

This quarter, analysts are expecting flat-to-up sequential trends in networking, mid-single-digit growth in broadband, and mid-teens growth in wireless — all consistent with seasonal patterns. Software is expected to rise sharply YoY due to VMware, but investors will differentiate between organic Broadcom software and new VMware revenue. Most expect VMware to contribute >$2B per quarter with 70–75% gross margin and 55–60% EBITDA margin — if Broadcom delivers higher, that would confirm synergy realization is ahead of pace.

Notably, guidance will carry more weight than the headline numbers. Street models are anticipating an update to full-year revenue closer to $51B and potential EBITDA upside if VMware cost actions flow through earlier than planned.