Can Broadcom Deliver a Strong Q3 Earnings After Nvidia & Marvell Show Signs of Weakness?
TradingKey - Broadcom (AVGO.US), the leader in ASIC (application-specific integrated circuit) chips, will release its Q3 FY2025 earnings after the U.S. market close on September 4. After Nvidia and another key ASIC player, Marvell Technology, delivered underwhelming results, investors are looking to Broadcom for signs that AI demand remains strong.
According to analyst consensus compiled by TradingKey, Broadcom is expected to report:
- Revenue: $15.82 billion, up 21% YoY
- Adjusted EPS: $1.66, up 34% YoY
Within this:
- The Semiconductor segment — which includes custom chips — is projected to grow 25% YoY
- The Infrastructure Software segment — including VMware — is expected to grow 16% YoY
- These two divisions contribute less than 60% and slightly over 40% of total revenue, respectively.
Has AI Demand Growth Slowed?
Demand from tech companies for large language model training and inference has driven growth in both GPU-based architectures (led by Nvidia) and ASIC chips (dominated by Broadcom), with each holding approximately 80% and 90% market share in their respective domains.
In Nvidia’s Q2 FY2026 report, while revenue and EPS grew over 50%, the slowing growth rate and weaker-than-expected forward guidance dampened market optimism about the AI outlook.
Marvell Technology faced a similar situation. Despite posting record revenue that met expectations, its lackluster guidance for the next quarter triggered a nearly 19% stock drop.
Analysts identified a common vulnerability: customer concentration risk. As markets debate whether cloud providers may marginally tighten capex, Nvidia’s reliance on top customers for 50% of its revenue could make its growth more vulnerable. Citi noted that Marvell’s data center performance was driven by concentrated customers, not broad-based AI demand.
For Broadcom, beyond existing clients like Google, Meta, and ByteDance, the company is expanding its custom chip customer base to include OpenAI, Arm, and Apple. Analysts say these relationships will continue to support AI chip demand well into 2027 and beyond.
More importantly, Broadcom’s diversified portfolio — spanning data centers, cloud, networking, broadband, and enterprise software — may enhance its resilience to sector-specific risks.
As AI shifts from training to inference, Broadcom’s ASIC market may follow a divergent growth path from Nvidia. Melius Research analysts said that while Broadcom faces challenges in achieving its promised 60% YoY AI revenue growth next year, the company is still pushing hard.
Melius forecasts that, in the long term, Nvidia’s data center business will grow at a 50% CAGR, while Broadcom could reach 60%. While benefiting from similar tailwinds as Nvidia, Broadcom also has the added support of a strong subscription-based software business from its VMware acquisition.
Although trading at a forward P/E of 37x over the next 12 months — a premium valuation — Melius notes Broadcom’s advantages:
- Delivering the very best custom-silicon programs
- Tomahawk 6 networking chips
- a software business that isn't seat-based software-as-a-service
Income Generator noted that given the company’s guidance for a potential margin decline in Q3, any negative commentary on growth peaking and slowing might not be surprising.
However, even if that occurs, Broadcom remains in a high tier of industry profitability, meaning any sell-off pressure would likely be temporary.
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