Broadcom's Next Earnings Report on September 2 Could Send the Stock Soaring. Here's Why.

Broadcom (NASDAQ:AVGO) has been something of an enigma over the past year or so. The stock has swung from an all-time high to a plunge of more than 20%, then reversed course to reach new record highs -- though it is currently more than 23% below its peak. The increased volatility is the result of uncertainty about the future of artificial intelligence (AI) and just how long the accelerating adoption will continue.

The company faces a key hurdle when Broadcom reports its fiscal 2026 third-quarter results after the market close on Wednesday, Sept. 2. Yet recent evidence suggests investors may be underestimating the endurance of AI in general and of Broadcom's performance in particular. The combination of tepid expectations and a strong performance could lead to a soaring stock price.

Image source: The Motley Fool.

You can't spell gains without "AI"

Broadcom holds a unique position in the AI revolution, offering a broad range of products across the technological landscape. This includes semiconductors, software, infrastructure, and security solutions serving the cable, mobile, broadband, and data center industries. In fact, 99% of all internet traffic crosses at least one Broadcom chip.

The rapid adoption of AI has been a boon to Broadcom, particularly since generative AI exploded onto the scene in late 2022. The company's Application-Specific Integrated Circuits (ASICs) can be customized to accelerate AI processing, making it a more energy-efficient option than competing graphics processing units (GPUs). Moreover, Broadcom's reach extends beyond semiconductors, with its networking solutions spanning every corner of data center operations.

This has fueled strong results for Broadcom. In its fiscal 2026 second quarter (ended May 3), it generated revenue that grew 48% year over year to $22.2 billion, while its adjusted earnings per share (EPS) surged 54% to $2.44. AI semiconductor sales stole the spotlight, growing 143% to $10.8 billion, accounting for nearly half of the company's revenue.

Management expects its accelerating growth to continue. For Q3, Broadcom is guiding to revenue of $29.4 billion, representing 84% growth, and adjusted EBITDA of roughly $20 billion, up 87%. That would mark a significant acceleration compared to the company’s Q2 results.

Broadcom's stock could soar

If you have any doubts about the potential for Broadcom stock to soar, look no further than some of the company's rivals and peers after recent earnings reports:

• AI chipmaker Nvidia saw its stock jump nearly 9% on the day following its fiscal 2027 second-quarter report on Aug. 26.
• Networking solutions provider Arista Networks rose nearly 4% after reporting robust second-quarter results earlier this month.
• Data mining and AI specialist Palantir Technologies stock surged nearly 30% on the day following its Q2 report in early August.

There are more, but you get the point.

Moreover, Broadcom has a documented history of reporting better-than-expected results and simultaneously raising its outlook. Investors tend to reward the "beat-and-raise." Furthermore, enthusiasm in response to an encouraging financial report could send Broadcom stock to new heights.

It's also worth noting that, at less than 19 times next year's expected earnings, Broadcom stock is attractively priced ahead of its financial report.

We'll know more on Wednesday.

Danny Vena, CPA has positions in Arista Networks, Broadcom, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Arista Networks, Broadcom, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.