Broadcom's Earnings Table Set to Weave AI Growth Narrative: Strategic Positioning Before December Results

Broadcom Inc. (AVGO) stands at a critical juncture as it prepares to unveil its fourth-quarter fiscal 2025 earnings on December 11. While the semiconductor giant has orchestrated an impressive operational momentum, investors must carefully evaluate whether current valuations justify accumulation ahead of these highly anticipated results.

Valuation Concerns Take Center Stage

Before diving into operational highlights, the elephant in the room deserves attention: AVGO shares are trading at a significant premium to historical averages. The forward 12-month P/E ratio sits at 41.23X—nearly double its own five-year median of 20.95X and substantially above the semiconductor industry average of 39.29X. Even compared to direct peers like Cisco Systems (18.53X) and Marvell Technology (28.6X), Broadcom commands a considerably elevated multiple. This stretched valuation backdrop frames all subsequent analysis of the company’s operational performance.

Revenue Expectations and AI’s Outsized Contribution

For the fourth quarter, Broadcom has guided for $17.4 billion in revenue, representing 24.5% year-over-year growth from the prior-year quarter. The Zacks consensus estimate of $17.5 billion sits marginally above company guidance, with earnings per share expected to reach $1.87—a 31.7% year-over-year increase.

What’s particularly noteworthy is AI’s disproportionate role in driving these figures. Artificial intelligence revenues are projected to surge 66% year-over-year to $6.2 billion, fueled by accelerating demand for Broadcom’s custom AI accelerators (XPUs). These application-specific integrated circuits have become essential infrastructure for training large-scale generative AI models, positioning Broadcom at the table where critical technology decisions get made by hyperscalers worldwide.

An Expanding but Margin-Compressed Portfolio

Broadcom’s product expansion reflects the company’s strategic commitment to AI-centric infrastructure. Recent launches include:

• Thor Ultra: The industry’s first 800G AI Ethernet Network Interface Card, capable of interconnecting hundreds of thousands of XPUs for trillion-parameter AI workloads
• Jericho 4: An Ethernet fabric router announced in August enabling interconnection of over one million XPUs across distributed data centers
• Tomahawk 6-Davisson: The third-generation co-packaged optics Ethernet switch delivering 102.4 terabits per second of optically enabled switching capacity
• Wi-Fi 8 silicon solutions: Industry-first offerings targeting the broadband wireless edge, spanning residential gateways, enterprise access points, and mobile clients

Infrastructure Software revenues are expected to grow 15% year-over-year to $6.7 billion, with VMware Cloud Foundation 9.0 driving momentum by offering enterprises a cloud-alternative platform for diverse workloads including AI.

However, this growth narrative carries a significant caveat: gross margins are expected to compress by 70 basis points sequentially due to a higher mix of lower-margin XPU sales. Non-AI semiconductor revenues are projected to reach approximately $4.6 billion with low-double-digit sequential growth, while enterprise networking faces headwinds with expected sequential declines.

Historical Execution Meets Current Skepticism

One factor supporting Broadcom’s credibility: the company has beaten the Zacks Consensus Estimate in all four trailing quarters, averaging a 2.82% earnings surprise. This track record of delivery provides some reassurance for earnings estimates heading into December 11.

AVGO shares have delivered a remarkable 118% return over the past 12 months, substantially outpacing both the broader Computer and Technology sector (26.9%) and the Semiconductors industry (70.5%). Compared to peers, Broadcom has significantly outperformed Cisco Systems (+32.2%), Arista Networks (+21.4%), and dramatically outpaced Marvell Technology (-7.6%).

The Hyperscaler Dependency Factor

Broadcom’s growth thesis hinges significantly on sustained hyperscaler demand for XPUs. The company anticipates accelerated XPU demand in the second half of 2026 as hyperscalers shift focus toward inference workloads alongside frontier model training. With major partners including OpenAI, Meta Platforms, Alphabet, NVIDIA, and Dell Technologies already in the fold, the company has constructed a formidable alliance network.

Yet this concentration of demand among a limited number of hyperscalers introduces execution risk. Any pullback in AI infrastructure spending, delays in model deployment timelines, or competitive pressures could materially impact near-term guidance.

The Valuation Conundrum

Broadcom currently carries a Zacks Rank #3 (Hold) rating, reflecting the analytical tension between operational strength and valuation concerns. At 41.23X forward P/E, the market is pricing in not just current AI momentum but sustained acceleration well into 2026 and beyond.

The company’s Value Score of D underscores the assessment that current valuations have moved significantly ahead of fundamental support levels. While Broadcom’s portfolio strength and partner ecosystem remain genuine competitive advantages, the stock’s entry point matters considerably for long-term total returns.

Investment Verdict

For existing shareholders, Broadcom’s operational execution provides a degree of confidence. For prospective investors, the December 11 earnings announcement represents an opportunity to assess whether the company’s guidance adjustments justify current valuations or signal caution.

Given the stretched valuation backdrop, margin compression headwinds, and concentration risk in hyperscaler demand, new accumulation is best approached on price weakness rather than ahead of earnings. Current positioning suggests waiting for a more attractive entry point before significantly increasing exposure to AVGO shares.