Is Broadcom Stock a Buy Ahead of Its Q2 Earnings Report After Market Close on Wednesday?

Broadcom (NASDAQ: AVGO) hasn't made as many headlines as some of its semiconductor rivals, at least until recently. The company's products span the inner workings of technology, and its processors are playing a critical role in the artificial intelligence (AI) revolution. This has fueled a stock price boom, up 473% over the past three years and 91% over the past 12 months (as of this writing).

The company faces a crucial hurdle when Broadcom reports its fiscal 2026 second-quarter results after the market close on June 3. Given the stock's meteoric rise, should investors lay out their hard-earned money to buy shares now or wait until after this key financial report? Let's see what the evidence suggests.

Image source: The Motley Fool.

You can't spell gains without "AI"

Broadcom provides a broad cross-section of technology products. These diverse offerings span software, semiconductors, and security solutions across the broadband, cable, mobile, and data center industries.

The AI boom has been a key growth driver for Broadcom over the past several years. The company's Application-Specific Integrated Circuits (ASICs) are becoming a mainstay for AI, as they can be customized to accelerate AI systems while being more energy-efficient than rival graphics processing units (GPUs). Moreover, Broadcom's networking solutions reach into every corner of data center operations.

This has been an extremely profitable strategy for Broadcom. In its fiscal 2026 first quarter (ended Feb. 1), it delivered revenue of $19.3 billion, up 29% year over year, while its adjusted earnings per share (EPS) of $2.05 jumped 28%. The highlight was AI solutions, which grew 106%.

Management expects robust growth to continue. For Q2, Broadcom is guiding to revenue of $22 billion, representing 47% growth, and adjusted EBITDA of roughly $14.96 billion, up 50%.

Broadcom's dividend is icing on the cake. The payout of $0.65 per quarter yields roughly 0.6% -- but that seemingly tepid yield is the result of its soaring stock price. Furthermore, its payout ratio of 47% and increasing profitability suggest Broadcom has plenty of resources to continue its 16 consecutive years of dividend increases.

Data by YCharts

Should you buy Broadcom stock before market close on Wednesday?

The above chart illustrates Broadcom's stock price over the past three years. The purple circles with the letter "E" in the middle illustrate when the company reported its financial results. In the majority of cases (75% of the time), the price increased in the three months following the financial report as investors piled into the stock. However, long-term investors fared far better, as those who held the stock for at least one year posted gains 100% of the time, averaging 87%.

Broadcom tends to report results that outpace Wall Street's expectations, while simultaneously boosting its forecast. Even in those instances when investors were initially doubtful, the company's long history of consistent growth eventually won them over, sending the stock to new heights.

As a general rule, I don't recommend date-driven buying, but concentrating on the long-term opportunity. For investors looking to establish a position or add to an existing one, now would be as good a time as any. AI stocks have rebounded from recent lows as investors have come to realize that AI is here to stay.

What does Wall Street have to say?

Wall Street is bullish on Broadcom. Of the 47 Wall Street analysts who offered an opinion in June, 94% rate the stock a buy or strong buy, and none recommended selling.

The stock might seem pricey at first glance, but the most commonly used valuation metrics fall short when assessing companies with accelerating growth, and Broadcom is a perfect example. The stock is selling for 39 times forward earnings (as of this writing). However, using the more appropriate price/earnings-to-growth (PEG) ratio -- which takes into account the company's rising growth -- yields a multiple of 0.59, when any number less than 1 is the standard for an undervalued stock.

Given the company's successful track record, accelerating sales and profits, and the continuing adoption of AI, the evidence suggests Broadcom stock is a buy.

Danny Vena, CPA has positions in Broadcom. The Motley Fool has positions in and recommends Broadcom. The Motley Fool has a disclosure policy.