Broadcom Earnings Preview: AI Surge Meets Valuation Risks Ahead of Report

Broadcom‘s Q4 2024 earnings, due after market close on Thursday, are expected to show robust growth driven by surging AI demand, with adjusted EPS projected at $1.87 and revenue at $17.5 billion, up significantly from last year. However, the stock’s high valuation raises concerns about potential post-earnings pullback.

• Broadcoms stock has surged over 180% since April, fueled by AI chip demand from major tech firms.
• AI segment revenue is forecasted to reach $6.2 billion, a 68% increase year-over-year.
• Trading at 42 times forward earnings, the stock exceeds its 10-year average of 17 times, signaling potential overvaluation risks.

What to Expect from Broadcoms Q4 2024 Earnings？

Broadcom earnings for the fiscal fourth quarter ending October 31, 2024, are anticipated to reflect strong performance propelled by artificial intelligence applications. Analysts forecast adjusted earnings per share of $1.87, a notable rise from $1.42 in the prior year, alongside revenue climbing to approximately $17.5 billion compared to $14.1 billion last year. This growth underscores Broadcoms pivotal role in supplying AI accelerators to hyperscale data centers operated by leading technology companies.

How Is AI Demand Impacting Broadcoms Revenue Growth？

The AI sector has become a cornerstone of Broadcom‘s business, with projections indicating $6.2 billion in revenue from this segment alone, representing a 68% year-over-year increase. This surge is attributed to heightened demand for custom AI chips, particularly from partnerships with entities like Google, where Broadcom’s technology supports advanced models such as Gemini 3. Expert Shaon Baqui from Janus Henderson Investors notes, “Expectations here are obviously elevated given the recent performance, but for good reason—they‘re significantly levered to the Google ecosystem.” Supporting data from Wall Street estimates highlights how AI orders, including tensor processing units, are set to bolster earnings through 2025. Beyond AI, Broadcom’s diversified portfolio in software, enterprise storage, broadband, and wireless communications provides stability, though investors closely monitor diversification to mitigate reliance on a few large clients. Peter Sorrentino, managing global growth equity strategy at Huntington National Bank, expresses caution: “Our fear is that its kind of primed for disappointment,” citing the stocks rapid ascent since April, which has pushed it to a 180% gain and a record close on Wednesday. Valuation metrics further amplify concerns, with the stock trading at 42 times forward earnings—far above its 10-year average of 17 times and pricier than most Magnificent Seven peers except Tesla.

Frequently Asked QuestionsWhat drove Broadcoms recent stock rally before the Q4 earnings？

Broadcoms stock rallied sharply following a major announcement in the previous quarter, where CEO Hock Tan revealed a $10 billion order from a new customer, sparking a 9.4% surge to a record high. This deal, combined with ongoing AI momentum, contributed to a 35% gain since Septembers earnings, positioning the company as a top performer in the S&P 500.

Will Broadcoms high valuation affect its post-earnings performance？

Broadcom‘s elevated valuation, at 42 times forward earnings, could lead to profit-taking even if results exceed expectations, as noted by analysts like Ryuta Makino from Gabelli Funds: “Everybody’s long and maybe some people are gonna sell off just for profit taking.” Investors are watching CEO Hock Tans commentary for insights on customer diversification and future AI opportunities to sustain the momentum.

Key Takeaways

• AI as Growth Engine: Broadcoms AI revenue is projected to hit $6.2 billion in Q4, up 68%, highlighting its critical role in the AI chip market.
• Valuation Risks: At 42 times forward earnings, the stocks premium pricing exceeds historical norms, potentially capping upside despite strong fundamentals.
• Investor Focus on Guidance: CEO Hock Tans earnings call updates on new deals and diversification will be key to addressing concentration concerns among major tech clients.