Oppenheimer expects Broadcom's Q2 performance to exceed expectations, with AI orders as the core driving force

Source: Global Market Watch

As chip giant Broadcom is set to release its second quarter results on June 3, Oppenheimer has published an optimistic preview report, predicting that the company will deliver results that beat expectations and raise guidance, with AI-related business serving as the primary growth driver.

Oppenheimer analyst Rick Schafer pointed out in the report that Broadcom’s AI revenue grew around 30% quarter-on-quarter, mainly driven by strong demand for customized ASIC chips and networking products. The company is regarded in the market as the second largest AI performance hardware provider after Nvidia, and has built a unique competitive moat through its self-developed XPU and network solutions.

Schafer emphasized that Broadcom has established deep partnerships with several tech giants, including Google, Meta, TikTok USA, Anthropic, and OpenAI. The company’s supply commitments are secured through 2028, providing high visibility into future orders. Specifically, Anthropic is expected to deploy 1GW of computing power this year, which could bring in $15 to $20 billion in orders; OpenAI plans to complete a 1GW deployment in fiscal year 2027.

Notably, Broadcom recently signed a multi-year strategic cooperation agreement with OpenAI to jointly design customized AI acceleration chips. Company management has previously outlined a clear blueprint, forecasting annual AI chip revenue to surpass $100 billion by the end of 2027. Currently, Broadcom reports a backlog of around $73 billion in orders and has secured manufacturing capacity for advanced 3nm and 2nm process nodes.

From a financial perspective, Broadcom demonstrates exceptionally high profitability. According to Oppenheimer, the company’s gross margin is about 78%, operating margin is around 66%, and free cash flow margin is about 42%. Market consensus for this quarter expects earnings per share of $2.40 and revenue of approximately $22.11 billion. Oppenheimer maintains a buy rating on Broadcom with a target price set at $450.

However, not all signals point to optimism. The report notes that OpenAI’s originally planned $18 billion custom chip deal has encountered financing obstacles, adding uncertainty to this important revenue stream. In addition, company insiders have had a net sale of about 403,000 shares over the past 90 days, worth approximately $133.5 million, including 70,000 shares sold by CEO Hock Tan.

As the earnings release date approaches, investors will closely watch actual AI revenue growth, whether third-quarter and full-year guidance are raised, details of newly signed orders, and gross margin trends. If the data aligns with Oppenheimer’s optimistic outlook, it could further reinforce the market’s revaluation of Broadcom as a core supplier of AI computing infrastructure.