Broadcom's fiscal Q1 results and Q2 guidance are poised for upside, driven by strength in AI application-specific integrated circuits and networking, Oppenheimer said in an earnings preview Wednesday.

The firm highlighted Broadcom's AI growth momentum, driven by its AI ASIC and networking businesses, which together account for roughly 25% of revenue. Oppenheimer reiterated Broadcom's position as the No. 2 AI semiconductor franchise after Nvidia (NVDA), citing expansion across hyperscalers and expected contributions from new AI projects

Broadcom's core businesses in networking, wireless, broadband, server/storage, and software continue to provide sustainable growth and cash return, the firm added.

Ahead of Broadcom's fiscal Q1 earnings release on March 6, Oppenheimer forecasts gross margins to rise 100 basis points sequentially to 77.9%, modeling free cash flow of $7.5 billion for the quarter. The firm also sees an upside from the company's VMware unit's new pricing model, projected to drive over $16 billion in revenue this year.

Oppenheimer reiterated its outperform rating and $225 price target on Broadcom.

Broadcom shares were up 5% in recent trading.