Broadcom Inc. (AVGO) enters its upcoming fiscal Q4 2025 earnings with strong tailwinds, and I remain bullish heading into the report on this coming Thursday. While valuation screens have tightened on traditional metrics, Broadcom’s accelerating AI semiconductor demand, expanding hyperscaler partnerships, and growing software subscription base strengthen the long-term thesis.
TipRanks Cyber Monday Sale
- Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
The company has become a critical component of global AI infrastructure, and I expect further upside for the stock, even after a 73% YTD gain.
Another Beat Looks Likely in Q4
Consensus expectations call for EPS of $1.87 and revenue of $17.47 billion, both meaningfully raised over the last 12 months—EPS by 11.2% and revenue by 8%. This reflects rising confidence in Broadcom’s AI-driven demand profile. Broadcom has an exceptional earnings track record, beating both revenue and EPS in 14 of the past 15 quarters, and the setup again points to upside.
Given the pace of AI compute deployments, accelerating custom ASIC volume, and ramping networking demand, I expect Q4 results to exceed consensus with a constructive Q1 outlook.
AI Infrastructure Continues to Drive Semiconductor Growth
Semiconductors account for roughly 62% of Broadcom’s business, and the segment is expected to grow 19% quarter-over-quarter in Q4. The primary driver is AI, which now represents more than half of semiconductor revenue. AI-related products are expected to grow above 20% sequentially to more than $6 billion in the quarter, supported by Broadcom’s unmatched position in custom AI silicon.
Broadcom has become the leading supplier of custom AI accelerators and the clear No. 2 overall AI compute provider behind Nvidia (NVDA). The company has seven hyperscaler programs underway, with Google (GOOGL), Meta (META), and ByteDance all ramping custom ASIC orders.
Its strategic partnership with OpenAI further strengthens this trajectory. That agreement, announced in Q4 2025, involves co-developing and supplying 10 gigawatts of custom AI accelerators beginning in the second half of 2026 and continuing through 2029. This is one of the largest AI infrastructure deals disclosed to date and meaningfully enhances Broadcom’s long-term revenue visibility.
Management has also indicated that a fifth major AI customer—believed to be Anthropic or xAI—could become a multibillion-dollar contributor as early as next year. Non-AI semiconductors remain healthy, with wireless expected to grow around 20% sequentially, broadband up close to 30%, and other segments delivering stable improvements.
Software Segment Strengthens Revenue Quality
Broadcom’s software segment, which accounts for nearly 40% of total revenue, provides stability and recurring cash flow to complement the faster-growing semiconductor division. The company expects software revenue to decline slightly sequentially but grow roughly 15% year-over-year in Q4.
A key milestone was the successful conversion of more than 90% of Broadcom’s top 10,000 customers to multiyear software subscriptions. The remainder will transition by fiscal 2026, driving a dramatic increase in annual recurring revenue. As VMware Cloud Foundation continues to see stronger adoption, Broadcom’s overall business mix becomes less cyclical and less dependent on fluctuations in semiconductor demand.
This is a significant evolution in the long-term thesis and helps justify the premium valuation relative to peers.
Durable Competitive Advantage and Strong Multi-Year Drivers
Broadcom is now widely viewed as the second most important AI infrastructure supplier after NVDA. Its leadership in custom AI silicon, high-performance networking, and Ethernet-based scale-out architectures gives the company a durable competitive advantage as hyperscalers diversify beyond monolithic GPU architectures.
Across the business, Broadcom benefits from a highly diversified portfolio, an efficiently managed manufacturing strategy, and a proven history of accretive M&A that has consistently expanded free cash flow. Its five-year financial profile reflects this strength, with revenue growing nearly 20% annually, EBITDA expanding in the mid-20% range, free cash flow rising more than 20% annually, and diluted EPS increasing by more than 50% annually on average.
These characteristics resemble a high-growth AI company more than a traditional semiconductor supplier, and the market has increasingly priced Broadcom as such.
Valuation Premium is Supported by Growth
Broadcom trades at a premium to traditional multiples, with a P/E of just over 62 and an EV/EBITDA of around 58, both well above sector medians.
My fair value calculation using a combination of valuation models—including DCF, P/E, EV/EBITDA, and revenue multiples—yields an intrinsic value estimate of ~$300 per share, implying around 23% downside from the current stock price.
However, similar to how investors previously struggled to value NVDA during the early AI boom, I believe Broadcom’s valuation reflects secular AI demand, multiyear contract visibility, and accelerating revenue growth that traditional models often undervalue. The magnitude, duration, and predictability of Broadcom’s AI opportunity remain underappreciated by many legacy valuation frameworks.
Wall Street Outlook
Wall Street holds a Strong Buy consensus rating, with 23 Buy recommendations, two Holds, and zero Sells. The average 12-month price target is $433.09, implying roughly 8.5% upside over the coming year.
Bulls in Control Ahead of Earnings
Broadcom enters its Q4 earnings with powerful momentum across AI compute, networking, and custom ASIC programs. With hyperscalers expanding capacity, the cloud backlog accelerating, VMware driving a larger base of recurring revenue, and multi-year AI contracts ramping up, I expect another earnings beat and strong forward commentary.
Given the strength of Broadcom’s AI positioning, expanding long-term visibility, and durable multi-year growth drivers, I remain bullish heading into the upcoming results.