Melius on Broadcom earnings: We see good things coming
Ben Reitzes, Melius Research head of technology research, joins 'Squawk on the Street' to discuss what to expect from Broadcom's quarterly earnings results.
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Broadcom Slips After Earnings Beat, Drags Down Tech ETFs
Shares of Broadcom Inc. (AVGO) fell on Friday, underperforming the broader semiconductor industry and stock market despite reporting stronger-than-expected earnings after the bell on Thursday. The stock dropped as much as 4.5% during the session, giving back some of its recent gains. While Broadcom beat revenue expectations for its fiscal second quarter, the results failed to dazzle investors who had bid up the stock to record highs in the lead-up to the report. The company reported $15 billion in revenue for the quarter, up 20% from a year ago and slightly above the $14.96 billion consensus estimate. It also guided for $15.8 billion in revenue for the current quarter, just a hair ahead of the $15.7 billion analysts were expecting. In other words, the results were solid, but not spectacular. And after a 78% rally off the April lows, expectations were sky-high. The stock closed at a record on Wednesday, so some profit-taking was to be expected. Broadcom has been a major beneficiary of the artificial intelligence boom. The company designs networking products that help connect AI chips inside data centers. It also works with major tech firms like Alphabet Inc. (GOOGL) and Meta Platforms Inc. (META) to design custom AI chips, giving them an alternative to Nvidia Corp.'s (NVDA) market-dominating GPUs. That exposure to AI has helped push Broadcom's market cap north of $1 trillion, making it one of the most influential stocks in major indexes and ETFs. Broadcom is currently the sixth-largest holding in the SPDR S&P 500 ETF Trust (SPY), with a weight of 2.4%. It's the fifth-largest holding in the Invesco QQQ Trust (QQQ), at 5%. It also has heavy representation in semiconductor-focused funds, making up 10.2% of the VanEck Semiconductor ETF (SMH) and 10.1% of the iShares Semiconductor ETF (SOXX). Investors looking for a more aggressive play on the stock have also been using the Defiance Daily Target 2X Long AVGO ETF (AVGX), which offers 2x leveraged exposure to Broadcom. That fund currently has $93 million in assets under management. Despite Friday's dip, Broadcom remains a key AI bellwether and a major driver of performance for many popular | © Copyright 2025 All rights reserved Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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Broadcom takes a private cloud victory lap as it axes bottom-tier VMware partners
This story was originally published on CIO Dive. To receive daily news and insights, subscribe to our free daily CIO Dive newsletter. Broadcom touted success in moving enterprise customers to the VMware Cloud Foundation private cloud platform during a Thursday earnings call, less than a week after eliminating the bottom tier of its technology partner program. The tech giant has converted 87% of its 10,000 largest customers to the VCF bundled offering since finalizing the $61 billion VMware acquisition in November 2023, according to CEO Hock Tan. 'The momentum from strong VCF sales over the past 18 months since the acquisition of VMware has created annual recurring revenue, otherwise known as ARR, growth of double digits in our core infrastructure software,' Tan said. Broadcom's infrastructure software segment revenue increased 25% year over year, accounting for $6.6 billion of $15 billion in total Q2 2025 revenue, CFO and Chief Accounting Officer Kirsten Spears said during the call. The company's semiconductor segment yielded $8.4 billion, accounting for 56% of total quarterly revenue. Broadcom shook up the VMware ecosphere in the year following the acquisition, rolling out major changes to the virtualization software company's product line, licensing policies and pricing model. Bundling thousands of individual offerings into an integrated private cloud alternative to hyperscaler services was central to the strategy. 'Customers are increasingly turning to VCF to create a modernized private cloud on-prem, which will enable them to repatriate workloads from public clouds while being able to run modern container-based applications and AI applications,' Tan said Thursday. The company identified a surge in private cloud interest among 1,800 IT decision-makers surveyed by research firm Illuminas in a report published last month. More than half of respondents said deploying new workloads in private cloud in the next three years was a priority and one-third had already shifted some public cloud workloads to an on-prem platform. 'Organizations feel that public cloud spending is getting out of hand and they're rethinking their cloud strategy, repatriating workloads onto the private cloud to drive better security and cost predictability,' Prashanth Shenoy, VP of product marketing in the VCF division at Broadcom, said during a May briefing. After an initial post-acquisition shock to the VMware partner ecosystem, which required more than 18,000 resellers to shift to the Broadcom Advantage program, the company leaned on partnerships to help drive VCF adoption earlier this year. Broadcom's partner network received another jolt on June 1, when the company reduced the number of authorized VMware resellers in the Americas and Asia-Pacific and Japan regions. 'To enable more focused investment and deeper support for those partners, we are streamlining the Broadcom Advantage Partner Program for VMware Resellers from four tiers to three,' Brian Moats, SVP, global commercial sales and partners at Broadcom, said in a blog post. The change eliminates the Registered tier, which contained 'a large number of partners with minimal engagement,' Laura Falko, head of global partner programs, marketing and experience at Broadcom, said in a Friday email. 'By removing that tier, we are concentrating our support, resources, and incentives around partners who are actively investing in technical certifications, consulting practices and outcome-based services.' Broadcom has given affected partners 60 days to close open customer accounts. The company declined to specify the number of partners or customers impacted, but Falko said the company is actively managing the transitions. 'We've provided our field and distribution teams with the tools and visibility to ensure continuity for customers,' she said, adding, 'This is not a shift away from the channel, it's a move to ensure that every customer interaction is handled by a partner who can deliver real value in a modern, cloud-first IT environment.'
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Astera Labs Leads in PCIe 6.0 & AI Connectivity: More Upside Ahead?
Astera Labs ALAB is emerging as a key player in next-gen data center connectivity with a full-stack portfolio spanning PCIe 6.0, UA Link, and CXL 3.0. It is the first to market with a complete PCIe 6.0 solution set, including retimers, gearboxes, smart fabric switches, and optical modules. The Aries 6 Smart Gearbox acts as a bridge between PCIe 5.0 and 6.0, addressing speed mismatches in complex hyperscale systems. Meanwhile, Scorpio P- and X-Series Smart Fabric Switches, now in preproduction, support both scale-up and modular scale-out AI topologies. Combined with Aries Retimers and the COSMOS software suite, the fabric switches deliver telemetry, diagnostics, and system-level optimizations for high-performance, low-latency AI infrastructure. Astera Labs is advancing next-gen data center infrastructure through strategic OEM collaborations and a broad standards-based product lineup. Its work with Wistron on NVIDIA's NVDA Blackwell-based MGX systems showcases its role in enabling full PCIe 6.0 support for AI servers. As a key contributor to the UA Link Consortium, Astera is gaining early momentum with the UA Link 1.0 standard. Beyond AI, it's expanding into general-purpose compute with design wins in SSDs, NICs and CPUs. Adoption of its Leo CXL controllers and Taurus Ethernet modules reflects growing demand for CXL 3.0 and 400G/800G Ethernet. Astera Labs leads with a full PCIe 6.0 portfolio comprising retimers, gearboxes, fabric switches, and optical modules tailored for hyperscaler AI clusters. Its Aries 6 Smart Gearbox bridges PCIe 5.0 and 6.0, while involvement in the UA Link Consortium strengthens its role in high-speed AI interconnects. In comparison, Broadcom AVGO has launched its PCIe Gen 6 portfolio, featuring high-port switches and retimers tested for interoperability with partners like Micron and Teledyne LeCroy. Broadcom's Interop Development Platform (IDP) offers advanced telemetry and diagnostics, facilitating system design for AI infrastructure. Broadcom's in-house SerDes technology and collaboration with ecosystem partners aim to support scalable AI clusters. Marvell Technology MRVL has expanded its connectivity offerings with the Alaska P PCIe retimer product line, built on 5nm PAM4 technology. These retimers, available in 8- and 16-lane configurations, are designed to scale connections between AI accelerators, GPUs and CPUs within servers. Marvell's focus on low power consumption and compatibility with PCIe Gen 6 and CXL standards addresses the needs of both AI and general-purpose server systems. Astera Labs has rallied 46.4% in a year compared with the industry's 37.4% growth and the sector's 11.7% rise. The S&P 500 index, meanwhile, has improved 12.5% during the said period. Image Source: Zacks Investment Research Astera Labs is presently trading at a forward 12-month price-to-sales of 18.93X, which is below its 1-year median of 20.01X. However, it remains overvalued compared to the industry. Image Source: Zacks Investment Research ALAB currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Marvell Technology, Inc. (MRVL) : Free Stock Analysis Report Broadcom Inc. (AVGO) : Free Stock Analysis Report Astera Labs, Inc. (ALAB) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
