Broadcom Inc. ((AVGO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Broadcom’s recent earnings call conveyed an overall positive sentiment, underscored by robust revenue growth and strategic advancements in AI semiconductors and infrastructure software. The company reported strong financial performance, driven by strategic orders and customer acquisitions. Despite facing challenges such as stagnation in non-AI semiconductor revenue and increased operating expenses, Broadcom’s growth trajectory and strategic investments paint an optimistic picture for the future.
Record-Breaking Revenue and Growth
Broadcom reported a record-breaking fiscal year 2025, with consolidated revenue soaring by 24% year over year to reach $64 billion. This impressive growth was primarily fueled by the AI semiconductor sector and VMware, with AI revenue experiencing a remarkable 65% increase to $20 billion and infrastructure software revenue rising by 26% to $27 billion.
AI Semiconductor Surge
The AI semiconductor segment was a standout performer, with revenue hitting $6.5 billion in Q4, marking a 74% year-on-year increase. Notably, Broadcom secured a substantial $11 billion order from Anthropic and welcomed a fifth XPU customer with a $1 billion order, underscoring the company’s strong position in the AI market.
Infrastructure Software Growth
Infrastructure software also demonstrated robust growth, with Q4 revenue climbing 19% year on year to $6.9 billion. The company reported strong bookings, with total contract value exceeding $10.4 billion, highlighting the sustained demand for its software solutions.
Strong Cash Flow and Dividend Increase
Broadcom’s financial health is further evidenced by a 39% increase in free cash flow, reaching $26.9 billion in fiscal 2025. Reflecting this strong performance, the company announced a 10% increase in its quarterly common stock cash dividend to $0.65 per share for fiscal 2026.
Non-AI Semiconductor Revenue Stagnation
Despite the overall positive performance, Broadcom faced challenges with its non-AI semiconductor segment. Q4 revenue in this area was $4.6 billion, showing only a 2% year-on-year increase, with projections for Q1 2026 remaining flat at approximately $4.1 billion.
Operating Expense Increase
Operating expenses saw a 16% year-on-year rise to $1.1 billion, driven by increased investment in research and development for cutting-edge AI semiconductors. This strategic investment is crucial for maintaining Broadcom’s competitive edge in the rapidly evolving tech landscape.
Gross Margin Pressure
The company’s gross margin experienced slight pressure due to the evolving product mix towards lower-margin AI system sales. This trend is expected to continue, with further pressure anticipated from system sales and the AI revenue mix in the future.
Forward-Looking Guidance
Looking ahead to fiscal 2026, Broadcom provided optimistic guidance, building on its strong fiscal 2025 performance. The company expects consolidated revenue of approximately $19.1 billion in Q1, representing a 28% year-on-year increase. AI semiconductor revenue is projected to double to $8.2 billion, supported by a substantial AI backlog of $73 billion. While non-AI semiconductor revenue is expected to remain flat, infrastructure software revenue is anticipated to grow at low double-digit percentages, driven by VMware.
In summary, Broadcom’s earnings call highlighted a positive outlook, driven by significant growth in AI semiconductors and infrastructure software. Despite challenges in non-AI segments and increased expenses, the company’s strategic investments and strong financial position suggest continued growth and resilience in the coming fiscal year.