To The Moon

Broadcom Earnings Preview: All Eyes on ASIC Timelines

AI ASIC chip leader $Broadcom(AVGO)$   is set to report its fiscal third-quarter 2025 results after the market close on September 4th. The market will be primarily focused on the ramp-up pace of its $Alphabet(GOOG)$   TPU business and the production timeline for ASIC orders from other key customers.

Core Financial Indicators

~The consensus estimate for Q3 revenue is $15.82 billion, representing a 21% increase year-over-year (YoY) and a 5% increase quarter-over-quarter (QoQ), in line with the company's prior guidance of $15.8 billion.

~Gross margin is expected to be 67%, an expansion of 4.7 percentage points YoY but a contraction of 1 percentage point QoQ.

~Consensus for Q3 GAAP net income is $5.15 billion, swinging to a profit from a loss a year ago and up 4% sequentially. The non-GAAP net income consensus is $8.22 billion, up 52% YoY and 6% QoQ.

Three Things to Watch

1. Will Marvell's Warning of a 'Non-Linear' ASIC Ramp-Up Affect Broadcom?

Last week, $Marvell Technology(MRVL)$   's Q2 report revealed a rare "seasonal" slowdown in demand from its largest ASIC customer, Amazon. The news, which sent Marvell's stock down over 18%, sparked concerns across the market about the pace of ASIC ramp-ups. Broadcom's ASIC revenue is currently heavily reliant on Google's TPUs, while chips for its other two major customers, $Meta Platforms, Inc.(META)$   and ByteDance, have yet to ramp to volume. Investors will be keen to know if the TPU ramp-up will also experience "seasonality," which could impact Broadcom's AI revenue.

2. What is the Status of TPUv7 Order Share and Production Timeline?

In April, Google announced its new TPUv7 Ironwood, its first TPU designed for inference and its first rack-scale AI server, similar to $NVIDIA(NVDA)$   's NVL72. Google has brought in MediaTek as a second source, ending Broadcom's exclusive role, though the two will work in parallel. The specific order allocation has not been officially disclosed.

The industry has seen how complex rack-scale systems can be; Nvidia's Blackwell GB200 NVL72 faced repeated delays, causing market anxiety before it began contributing to revenue in Q2. As this is also Google's first foray into rack-scale server design, investors will likely be paying close attention to the production progress of the TPUv7 Ironwood rack. Current reports from sources like Reuters and TrendForce suggest the rack may not enter mass production until early 2026, which could affect the pace of Broadcom's AI revenue growth.

3. When Will the Non-AI Semiconductor Business Return to Growth?

Broadcom's recent performance has been primarily driven by the ramp-up of its ASIC business, strong demand for AI networking chips, and the consolidation of its VMware acquisition. Meanwhile, its traditional semiconductor segments—such as server storage, broadband, wireless, and industrial—have remained sluggish, with non-AI semiconductor revenue continuing to decline year-over-year. The market is looking for guidance from management on the future growth trajectory of these non-AI businesses.

Option Market Signals

The options market is positioning for AVGO's earnings: front-end volatility has firmed (30-day IV ~49%, IV Percentile 58%, IV Rank 27)—above average, not extreme. The put/call volume ratio at 0.56 leans bullish but isn't decisive.

For newcomers, focus on the implied move and compare it with typical earnings moves. If your expected move is smaller than what options price in, consider defined-risk spreads/iron condors to benefit from a post-announcement vol crush; if you expect a bigger move, use small-size long-vol setups (straddles/wide butterflies) with risk capped.

Summary

Overall, as the world's second-largest AI chip company by revenue, investors are still looking for rapid growth in Broadcom's current AI business and a strong forward-looking guidance. The key focus will be on the ramp-up pace for its ASIC customers and the progress of a recovery in its non-AI segments. A disappointing report from Broadcom could potentially trigger another rotation of capital from AI hardware to AI software stocks.

~Potential Positive Catalysts: Clear AI Revenue Target.

~Risks to Monitor: Data Center Slowdown.

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