Broadcom Inc. (AVGO) shares are moving higher ahead of its next earnings report, with investor sentiment reaching levels not seen since the company’s 2021 post-pandemic breakout. As of early June 2025, the stock is trading near all-time highs, fueled by growing optimism around AI-related demand, steady dividend growth, and a broader tech rally.

The stock is up more than 45% year-to-date, outperforming both the S&P 500 and the SOX semiconductor index, and showing signs of continued institutional accumulation. While valuation concerns have started to surface, bulls argue that Broadcom’s diversified revenue streams and AI infrastructure exposure justify the premium.

AI Hype Is Back — But Broadcom’s Position Is Real

Unlike many semiconductor names whose rallies depend on high-beta momentum, Broadcom has actual contracts and design wins tied to AI expansion. Its custom ASIC (application-specific integrated circuit) business, especially tied to cloud hyperscalers, is now being viewed as a core engine of margin expansion going into the back half of 2025.

Management has emphasized that AI infrastructure spend isn’t just theoretical — it’s already embedded in forward guidance. In past calls, Broadcom has stated that AI-related revenue could reach 25% of semiconductor sales by 2026, which would materially change its earnings mix.

VMware Integration Is Under the Microscope

Broadcom’s $69 billion acquisition of VMware closed late last year. While investors were initially cautious about the deal, sentiment has shifted as synergies begin to show up in the numbers. VMware is now contributing to recurring software revenue, which helps offset the volatility of Broadcom’s hardware sales.

More importantly, the VMware unit gives Broadcom greater pricing leverage in enterprise IT — a segment that's consolidating faster than expected. If integration continues smoothly, analysts expect it to provide high-single-digit EPS accretion by fiscal 2026.

What to Watch This Earnings Season

Analysts are forecasting revenue of around $13.3 billion for the quarter and EPS north of $10.50, depending on final guidance adjustments. The focus won’t just be on headline numbers, though. Wall Street will be watching for:

• AI infrastructure commentary
• Gross margin stability
• Software subscription growth post-VMware
• Any upward revision to full-year guidance

Several firms, including Morgan Stanley and Raymond James, have raised price targets above $1,750, citing confidence in AI-fueled upside and better-than-expected software integration.

Valuation Is High — But So Is Visibility

At over 28x forward earnings, Broadcom is no longer a value play. But it’s also not priced like pure-play AI stocks trading at 50x–100x. The company’s dividend yield of around 1.9%, $50B in annualized free cash flow, and proven capital allocation strategy help justify the multiple in a market that’s increasingly bifurcated.

If this quarter delivers what bulls are hoping for — strong AI momentum, stable margins, and evidence of VMware synergies — Broadcom could cement its role as one of the few "defensive growth" names in the semiconductor space.