AVGO's Google Deal Aids Infrastructure Software Growth: What's Ahead?
BroadcomAVGO has announced an expanded partnership with Alphabet’s GOOGL Google Cloud to support a new service called Cloud Network Insights. Powered by Broadcom’s AppNeta technology, the offering is being launched as a native Google Cloud service, exclusively available to its users. This solution is designed to deliver end-to-end network observability, enabling enterprises to monitor and optimize application and network performance across increasingly complex IT environments.
The new service combines Broadcom’s deep network monitoring capabilities with Google Cloud’s infrastructure scale. The solution provides a unified view of performance across multi-cloud, hybrid and SaaS environments. The need for such tools is rising as enterprises deploy AI-driven workloads and distributed applications that span multiple platforms. Traditional monitoring systems often lack visibility beyond internal networks, making it difficult to identify performance bottlenecks.
Cloud Network Insights addresses the deficiencies of traditional monitoring systems by offering full network path visibility to distinguish between application and network issues. The solution unifies monitoring of applications, agents, and networks across environments and enables faster troubleshooting through improved diagnostics and reduced resolution times. The solution also enables proactive monitoring using synthetic testing, helping organizations detect issues before they impact end users.
Broadcom is benefiting from the growing deployment of AI agents and cross-cloud architectures. Increase in network complexity is driving demand for observability tools, while AppNeta’s ability to do real-time diagnostics is a key catalyst. The expanded partnership with Alphabet increases Broadcom’s exposure to cloud infrastructure software, one of AVGO’s key strategic pillars post VMware acquisition.
AI & VMware to Drive AVGO’s Top-Line Growth
Broadcom expects AI-related revenues of $10.7 billion in the second quarter of fiscal 2026, suggesting a 140% year-over-year upsurge. AI networking is expected to accelerate in the second quarter of fiscal 2026 and grow to 40% of the total AI revenues. Semiconductor revenues are expected to be $14.8 billion, indicating 76% year-over-year growth.
The expanded deal with Alphabet also signifies AVGO’s increasing relevance not just as a chip supplier but as a critical software partner to hyperscalers. Infrastructure Software benefits from a strong security portfolio and the growing adoption of VMware Cloud Foundation (VCF). VCF is the essential software layer in data centers as it integrates CPUs, GPUs, storage and networking into a common high-performance private cloud environment. VCF helps enterprises to scale complex generative AI workloads effectively with the agility that hardware alone cannot provide. Broadcom believes the growth in generative and agentic AI will create the need for more VMware, which bodes well for the Infrastructure Software prospects. Segment revenue is expected to increase 9% year over year to $7.2 billion in the second quarter of fiscal 2026.
Broadcom expects revenues of $22 billion, indicating 47% year-over-year growth for the second quarter of fiscal 2026. The Zacks Consensus Estimate for revenues is currently pegged at $22.04 billion, suggesting 46.9% growth from the figure reported in the year-ago quarter.
AVGO Faces Tough Competition
Broadcom is facing stiff competition in the semiconductor and infrastructure software markets from NVIDIANVDA and CiscoCSCO, respectively.
NVIDIA is benefiting from the strong growth of AI and high-performance accelerated computing. The growing demand for Gen AI and large language models using GPUs based on NVIDIA’s Hopper and Blackwell architectures is aiding data center revenues. In the fourth quarter of fiscal 2026, revenues from Data Center (which accounted for 91.5% of NVDA’s revenues) jumped 75% year over year and 22% sequentially to $62.31 billion.
Cisco’s AppDynamics (now integrated with Splunk) is positioned as a full-stack application performance monitoring (APM) and business observability platform, with a strong emphasis on linking application performance to business outcomes. The service offers code-level diagnostics, real-time analytics and root-cause analysis across a distributed system. Splunk targets to add 1000 new logos in fiscal 2026.
AVGO’s Share Price Performance, Valuation & Estimates
Broadcom shares have appreciated 21.4% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 7.6%.
AVGO Stock's Price Performance
Image Source: Zacks Investment Research
The AVGO stock is trading at a premium, with a forward 12-month price/earnings of 29.08X compared with the broader sector’s 25.32X. Broadcom has a Value Score of F.
AVGO Stock’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2026 earnings is pegged at $11.45 per share, up 1.5% over the past 30 days, suggesting 68% growth from fiscal 2025’s reported figure.
Broadcom currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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