Broadcom Q4 2025 Earnings

If you’ve been looking for the engine room of the artificial intelligence revolution, you might have just found it. While NVIDIA grabs the headlines with its GPUs, Broadcom Inc. (NASDAQ: AVGO) has quietly cemented itself as the 2nd most important architect of the world’s biggest AI infrastructure.

The company’s recent earnings delivered a beat and raise performance that underscores just how critical its technology has become. But, despite that, the stock dipped in after-hours trading. Let’s dive into what Broadcom actually does, unpack the massive numbers they just dropped, and figure out why Wall Street is acting hesitant despite a record-breaking quarter.

The Silent Giant: What Does Broadcom Actually Do?

Before we get into the weeds of the financials, it’s important to understand why Broadcom matters. They don’t just make one thing; they make the connections that make everything else work.

Broadcom operates in two massive segments:

1. Semiconductor Solutions: This is the hardware. They build and design the XPUs (custom AI accelerators) that companies like Google (TPUs) use to train their AI models. They also make the networking switches (like the Tomahawk and Jericho series) that allow thousands of AI chips to talk to each other at lightning speeds. If you are building an AI data center, you likely need Broadcom’s DSPs, optical interconnects, and PCI Express switches to make it run.

2. Infrastructure Software: Through massive acquisitions like VMware, Symantec, and CA Technologies, Broadcom provides the software backbone for global enterprises. This segment focuses on modernizing private clouds, cybersecurity, and mainframe operations.

Essentially, if the internet or a data center is running, Broadcom is likely involved.

The Numbers: Q4 2025 Earnings vs. Expectations

Broadcom didn’t just meet expectations; they cleared them comfortably. The company reported a record-breaking quarter fueled by an insatiable demand for AI hardware.

Here is the breakdown of how they did versus Wall Street consensus:

• Revenue: Reported $18.02 billion, up 28% year-over-year. This beat analyst estimates which were hovering around $17.5 billion.

• Earnings Per Share (Non-GAAP): Reported $1.95, beating expectations of ~$1.87.

• Adjusted EBITDA: A massive $12.2 billion, representing a staggering 68% of revenue.

• Free Cash Flow: The company generated $7.5 billion in cash, essentially turning 41 cents of every dollar earned into pure cash flow. That’s one of the reasons Broadcom is one of my biggest holdings as that sort of free cash flow margin is hard to find outside of a few top tier companies.

For the full Fiscal Year 2025, revenue hit $63.9 billion, up 24% from the previous year which means that based on Q4, growth is accelerating. To sweeten the deal for long-term holders, Broadcom raised its quarterly dividend by 10% to $0.65 per share, marking their 15th consecutive year of dividend increases. Not a big yield but something is better than nothing.

The Earnings Call: The $73 Billion Backlog & a New Customer #5

The earnings call was a continuation of good news. CEO Hock Tan, known for his no-nonsense communication style, dropped several bombshells regarding the future of their AI business.

The AI Rocket Ship

AI revenue for the quarter grew 74% year-over-year to $6.5 billion. To put that in perspective, AI revenue has grown 10x over the last 11 quarters. Management expects this momentum to accelerate, forecasting Q1 AI revenue to double year-over-year to over $8.2 billion.

The $73 Billion Backlog

Perhaps the most interesting number from the call was the backlog. Broadcom currently has $73 billion in AI orders (XPUs, switches, and components) booked for delivery over the next 18 months. This gives them incredible visibility into 2026, essentially locking in massive revenue streams regardless of short-term economic fluctuations.

New Mystery Clients

Hock Tan updated investors on their custom chip (XPU) customers.

• Customer 4: Broadcom received an $11 billion order from their fourth major custom silicon client (Anthropic) for delivery in late 2026, that’s on top of the $10 billion they announced last quarter.

• Customer 5: The company has officially acquired a fifth custom silicon client, securing a $1 billion initial order. While Tan did not name them, industry speculation points heavily toward OpenAI, especially given recent press releases about their partnership.

Networking Dominance

It’s not just about chips. The demand for networking is exploding as companies build clusters of AI computers. Broadcom’s Tomahawk 6 switch—the industry’s first 102-terabit switch—is booking at record rates.

The Grilling: Analyst Q&A Highlights

The Q&A session was lively, with analysts digging for cracks in the armor. Here are the key themes they pressed management on:

The Custom Tooling Debate

The Question: Analysts asked if big tech customers (like Google or Meta) might eventually dump Broadcom to design their own chips in-house using customer-owned tooling to save money.

The Answer: Hock Tan dismissed this as an overblown hypothesis. He argued that building custom silicon is a multi-year, complex journey. Broadcom provides the critical IP and hardware that is incredibly difficult to replicate. He noted that even as customers scale, they continue to rely on Broadcom for the next generation of chips because the technology moves too fast for them to catch up on their own.

The Margin Question

The Question: With AI hardware becoming a bigger part of the pie, will gross margins suffer? (AI hardware typically has lower margins than software).

The Answer: Management admitted that AI revenue is dilutive to gross margins because Broadcom has to pass through the cost of expensive components like HBM (High Bandwidth Memory). However, they emphasized operating leverage. Because revenue is growing so fast, the actual profit dollars (operating margin) will continue to grow, even if the gross margin percentage ticks down slightly.

Clarifying the OpenAI Deal

The Question: There was confusion about the recently announced deal with OpenAI for 10 gigawatts of capacity.

The Answer: Hock Tan clarified that the 10GW announcement is a long-term infrastructure alignment for 2027-2029. However, the custom chip (XPU) project with OpenAI is a separate, very advanced program that is moving quickly, likely represented by the new Customer 5 orders.

Valuation: Why is the Stock Down?

If the earnings were a beat, the guidance was strong, and the backlog is record-breaking, why did the stock drop ~5% in after-hours trading?

The answer likely lies in valuation and expectations.

1. Priced for Perfection: Heading into this earnings report, Broadcom stock was up nearly 75% year-to-date and up 121% in the last year. It was trading at a forward P/E ratio that demanded not just a beat, but a flawless beat. When a stock is priced for perfection, even great news can trigger a sell the news event as traders lock in profits. That doesn’t mean the stock is doomed but it might mean investors wait for further news to push the price higher or lower.

2. Non-AI Weakness: While AI is booming, the rest of the business is just stable. Non-AI semiconductor revenue (broadband, storage, industrial) was flat to down. Investors looking for a recovery in the traditional cyclical markets didn’t get the strong signal they wanted.

3. Guidance Nuance: While the Q1 revenue guidance of $19.1 billion is strong (up 28% YoY), the sequential growth in non-AI segments is expected to be down due to seasonality. Investors hyper-focused on growth might have wanted an even bigger forecast given the AI hype. It is quite possible that the growth next year will fall towards the latter part of the year given the 12-18 month backlog they presented and the new $20B+ in deals recently announced that might take time to materialize in the revenue.

The Bottom Line

Broadcom’s Q4 2025 earnings confirmed its status as a titan of the AI era. With a $73 billion backlog, solid growth, and new custom silicon customers, the fundamentals are arguably stronger than ever.

The stock’s dip appears to be a valuation reset rather than a structural problem especially in light of the worries that Oracle’s earnings brought to the market. For investors, Broadcom remains a unique beast: it offers the explosive growth potential of an AI pure-play combined with the massive cash flow and stability of a mature software infrastructure company. The nice thing is that unlike some of the other players, they don’t have to make massive investments to benefit from the AI boom and will be one of the main companies providing the picks and shovels of this boom.

As Hock Tan put it, the AI spending momentum is only continuing to accelerate and Broadcom is perfectly positioned to benefit from that. The valuation certainly isn’t cheap, it is a 2 trillion dollar company after all, trading at a 50x multiple but the free cash flow this business generates can be used to further invest in the business and potentially acquire additional companies and most important of all it’s growing. While NVDA’s GPUs are clearly the lead dog right now, companies are seemingly starting to look for cheaper alternatives and Broadcom is a direct beneficiary of that and I think the market is pricing in some of those market share gains with that multiple and the growth expectations that come with it for me. For me, this is a hold at this point but a dip under a 40x multiple would likely make me pick up more shares.

Disclaimer: I am long AVGO, GOOGL, MSFT, META. This article is for informational purposes only and does not constitute financial or investment advice. The author is not a registered investment advisor. All investment strategies and investments involve risk of loss. Nothing contained in this article should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. Please consult with a professional financial advisor before making any investment decisions.