Broadcom reported AI chip revenue up 35% YoY, while VMware integration kept software margins above 70%. Alpha Score 64 signals moderate upside.
Broadcom's latest earnings painted a two-part picture: the AI chip business is accelerating, and the software division is stabilizing after the VMware acquisition. Revenue came in above consensus, the company said, boosted by custom AI accelerators for cloud customers.
The AI chip segment, which includes custom ASICs for Google and other hyperscalers, grew 35% year over year. That pace outpaces Nvidia's data center growth in the same period, though from a smaller base. Broadcom's chip design partnerships lock in long-term contracts, giving visibility into future orders.
On the software side, the VMware integration is on track. Margins in the software segment held above 70%, a sign that cost synergies are materializing. Broadcom's broader infrastructure software portfolio, including mainframe and security products, contributed steady recurring revenue. The company's push into network security software adds another layer, though competition from Palo Alto Networks and CrowdStrike remains stiff.
The Alpha Score for AVGO sits at 64, a Moderate rating. That reflects a balanced risk-reward: the AI tailwind is strong, but the valuation already prices in much of the growth. The stock trades at 28x forward earnings, in line with peers like NVDA. For investors, the key question is whether the software business can sustain its margin expansion as the AI cycle matures. Broadcom's management has guided for software margins to improve further in the second half of the fiscal year.
The next catalyst is the August earnings call, where the company will provide its fiscal Q3 outlook. Until then, the stock's direction hinges on AI chip orders from cloud customers. Visit the AVGO stock page for real-time price data and Alpha Score updates.
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