Broadcom highlights this week's earnings slate as investors assess AI landscape

By Bill Peters and James Rogers

Earnings Watch: Other key reports will arrive from Dick's Sporting Goods, Dollar Tree and Zscaler

Nvidia Corp.'s eagerly-anticipated results grabbed most of the attention last week as the chip giant and AI darling reported better-than-expected revenue and earnings.

This week attention will be focused on Broadcom Inc. (AVGO). The chipmaker reports results Thursday with Wall Street trying to weigh its artificial-intelligence potential.

Broadcom's last earnings report was well received on Wall Street, leading some to view the company among the main AI beneficiaries besides Nvidia Corp. (NVDA), at least in the hardware arena. Shares of Broadcom had also been seeing growing attention from fund managers earlier in the summer.

But the stock is down roughly 12% from its highs, and technology-sector investors in general have become more focused on how long the AI rally can sustain.

Numerous analysts, though, are upbeat about Broadcom's upcoming report.

Oppenheimer's Rick Schafer expects to see upside to Broadcom's third-quarter numbers and fourth-quarter outlook led by AI and the company's VMware business. Broadcom completed its acquisition of virtualization specialist VMware late last year. AI contribution is expected to be more than $11 billion this year, up from $7.5 billion entering the year, split 65/35 between ASIC and networking, Schafer said in a note released Friday.

J.P. Morgan analyst Harlan Sur is also bullish in his Broadcom AI expectations, and says the company is on track to drive around $12 billion in AI revenues this year and more than $16 billion next year. Broadcom remains the global number two AI semiconductor supplier behind Nvidia and is the No. 1 market-share leader in 7-nanometer, 5-nanometer, and 3-nanometer custom chip designs, Sur said in a recent note.

This week in earnings

Other notable companies reporting results include Gitlab Inc. (GTLB), following a report that the software-development platform was weighing a possible sale. Earnings are due from Hormel Foods Corp. (HRL), as shoppers continue to zero in on food prices. Bowling-alley chain Bowlero Corp. (BOWL) will also report, for a look at how much fun people are still having - or, at least, how much bowling they're still doing. Maker of outerwear, accessories, footwear and uniforms Land's End Inc. (LE) is also on deck.

Zscaler Inc. (ZS), HealthEquity Inc. (HQY), Hewlett Packard Enterprise Co. (HPE), C3.ai Inc. (AI), Ciena Corp. (CIEN) and DocuSign Inc. (DOCU) also report.

The calls to put on your calendar

More retailers: Dick's Sporting Goods Inc. (DKS), Dollar Tree Inc. (DLTR), Rent the Runway Inc. (RENT) and Big Lots Inc. (BIG) report during the week. The results will arrive as executives through last week continued to lament the state of shoppers, as higher grocery prices eat up the money they have leftover to buy things like clothes and athletic gear. Lower-income shoppers likelier to seek out discounts have felt the pain more. Some are making bigger changes. Meanwhile, the biggest chains, like Walmart Inc. (WMT) and Target Corp. (TGT), have shown signs of pulling ahead of the pack.

The numbers to watch

Broadcom sales: Semiconductor revenue, which accounted for 58% of Broadcom's second-quarter revenue, is expected to be up 2% quarter-over-quarter and up 7% year-over-year, according to Oppenheimer. Networking, which makes up 53% of semiconductor revenue, is expected to be up 5% quarter-over-quarter and up 43% year-over-year driven by Communications Services Provider demand for custom AI ASICs and Ethernet switches, according to Oppenheimer analyst Rick Schafer, in a note released Friday.

Ciena guidance: Ciena reports third-quarter results Wednesday and its fourth-quarter guidance and fiscal year 2025 estimates are key, according to Morgan Stanley. Gradual signs of recovery in service provider spending and growing need from hyperscalers, or companies with massive data center operations, make Ciena's fiscal year 2025 "look more reasonable," according to Morgan Stanley analyst Meta Marshall, in a recent note. Morgan Stanley maintained its overweight rating and $55 price target for Ciena. This accounts for a scenario where service providers recover quicker than expected, Ciena sees AI revenue ahead of expectations, or sees stronger traction or large wins in its routing business, Marshall wrote.

-Bill Peters -James Rogers

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09-02-24 1911ET

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