Can Broadcom's stock break the software curse after earnings? Here's what Wall Street is saying.

By Emily Bary and Britney Nguyen

Best known for its chip business, Broadcom has seen its stock get weighed down by concerns over exposure to software sales

Broadcom could post accelerating AI sales on Wednesday.

The enthusiasm around Broadcom's custom-chip business has died down somewhat on Wall Street, and the company will try to re-energize investors with its Wednesday afternoon earnings report.

The problem is that Broadcom (AVGO) is not just a semiconductor company. The other portion of its business - selling virtualization and cloud software - bears watching in the current market climate.

Broadcom has turned into a software powerhouse, in large part due to its 2023 deal for VMware. Software accounted for 39% of the company's revenue in the prior quarter, noted Paul Meeks, head of technology research at Freedom Capital Markets. But software revenue that was once an investor positive, offering margin and diversification benefits, is now somewhat of a liability as investors assess the threat that artificial intelligence poses to traditional vendors.

"To what extent has and will it be disintermediated by AI?" Meeks asked in emailed comments. The company's commentary and guidance could offer some framing.

Cantor Fitzgerald's C.J. Muse added that he and his team "have gotten some questions on sustainability of Broadcom's multiple given software exposure."

"Our sense is that AI can continue to provide an offset," he added.

AI-related sales could show an acceleration when Broadcom posts its fiscal first-quarter results on Wednesday. Oppenheimer's Rick Schafer models 30% sequential growth there, versus 25% growth in the fiscal fourth quarter.

On the whole, though, Meeks isn't quite sure Broadcom will be able to win over Wall Street with its report. He's concerned about "the reactions last week to the announcements from other AI bellwethers." For instance, Nvidia crushed expectations with its results and guidance, but its stock fell noticeably.

Conversely, Broadcom's stock may be "already grossly oversold" in light of its recent declines, Meeks added. Broadcom, like rival Nvidia (NVDA), has seen its stock fall thus far in 2026 and badly lag the PHLX Semiconductor Index SOX.

Chip-sector investors have come to favor semiconductor-equipment makers and memory providers when looking for fresh ways to play the AI boom. And Mizuho trading-desk analyst Jordan Klein wrote that "many" investors view Broadcom as a short play ahead of Nvidia's GTC event later this month.

Shares of Broadcom are off 9% on a year-to-date basis and down 17% over three months.

Evercore ISI's Mark Lipacis took a more upbeat view of Broadcom's potential to satisfy investors. He thinks the report will reflect a number of encouraging trends, including "broadening demand" for the tensor processing units that Broadcom develops alongside Alphabet, as well as a "low bar" for the infrastructure-software business and strong wireless momentum.

Broadcom is expected to report adjusted earnings of $2.03 per share on revenue of $19.3 billion for the fiscal first quarter, according to analysts tracked by FactSet. The company's semiconductor-solutions segment is expected to report revenue of $12.4 billion for the January quarter. Meanwhile, analysts are eyeing adjusted earnings of $2.17 a share on revenue of $20.5 billion for the fiscal second quarter, according to the FactSet consensus.

-Emily Bary -Britney Nguyen

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-03-26 1430ET