Published December 11, 2025
Broadcom’s fiscal fourth-quarter 2025 numbers have landed, and they are big. The chip and software giant beat Wall Street estimates on both revenue and earnings, powered by surging demand for custom AI semiconductors and solid growth from its VMware-driven infrastructure software business.
At the same time, investors are wrestling with a different set of numbers: a roughly 180% gain in the stock since April, a forward P/E near 40–42x, and a string of bullish analyst price targets that already bake in years of AI growth. [1]
After the results hit, AVGO shares jumped more than 3% in extended trading to around $419, recovering from a regular-session close just above $406, where the stock had already been under pressure alongside other AI and infrastructure names hit by Oracle’s post-earnings slump. [2]
Key takeaways for AVGO investors
- Q4 FY25 revenue of about $18.0–18.02 billion, up roughly 28% year over year, topped consensus expectations of ~$17.5 billion. [3]
- Non‑GAAP EPS came in around $1.95 vs. ~$1.87 expected, extending Broadcom’s multi‑year streak of earnings beats. [4]
- Semiconductor revenue of roughly $11.1 billion beat estimates, with AI chips now accounting for more than half of that segment and AI semiconductor revenue growing about 74% year over year. [5]
- Management guided Q1 FY26 revenue to about $19.1 billion and said AI semiconductor revenue should roughly double year over year to about $8.2 billion next quarter. [6]
- The VMware business helped drive ~17% growth in infrastructure software, with over 90% of Broadcom’s top 10,000 VMware customers now holding VMware Cloud Foundation (VCF) licenses. [7]
- Despite the beat‑and‑raise quarter, valuation is stretched: the stock trades at about 40x forward earnings and a triple‑digit trailing P/E, making it pricier than nearly all of the Magnificent Seven except Tesla. [8]
- On the same day, EU cloud providers escalated a legal challenge to Broadcom’s $69 billion VMware acquisition, arguing the European Commission misjudged its impact on competition in server virtualisation. [9]
Q4 2025: Beat on the top line, beat on the bottom line
Broadcom’s fiscal fourth quarter (ended October 31) delivered exactly what AI‑hungry investors hoped to see — and a bit more.
- Revenue: Broadcom reported about $18.0–18.02 billion in Q4 sales, comfortably ahead of Wall Street’s ~$17.46–17.5 billion consensus and roughly 28% higher than a year earlier. [10]
- Earnings: Non‑GAAP EPS landed near $1.95, beating expectations of $1.87 and marking yet another quarter of upside versus analyst models. [11]
- Segment mix: Semiconductor revenue was about $11.07 billion, ahead of estimates around $10.73 billion, while infrastructure software grew at a high‑teens pace thanks to VMware. [12]
Management highlighted that AI semiconductors remain the dominant growth engine, with AI‑related chip revenue growing in the mid‑70% range year over year and now making up more than half of Broadcom’s semiconductor business. [13]
On a full‑year basis, Broadcom pointed to:
- Record adjusted EBITDA of roughly $43 billion, up about 35% year over year, and
- Free cash flow near $27 billion, helped by rich margins across both AI hardware and software. [14]
The company also raised its annual dividend by around 10% for fiscal 2026 to approximately $0.65 per share, continuing its tradition of returning a large portion of cash to shareholders even as it funds massive AI and networking investments. [15]
Guidance: AI chips set to double again in Q1 2026
If the backward‑looking numbers were strong, the outlook may matter even more for a stock that has already rocketed higher in anticipation.
Broadcom forecast:
- Q1 FY26 revenue of about $19.1 billion,
- Adjusted EBITDA margin of roughly 67%, and
- AI semiconductor revenue expected to double year over year to roughly $8.2 billion, driven by custom accelerators (“XPUs”) and Ethernet AI networking chips. [16]
That guidance effectively confirms an AI super‑cycle:
- In Q3, Broadcom reported AI semiconductor revenue of $5.2 billion, up 63% year over year, with XPUs making up about 65% of that total. [17]
- Management also disclosed a fourth major XPU customer that has already placed more than $10 billion in AI rack orders, with volume shipments expected to ramp meaningfully in fiscal 2026. [18]
- CEO Hock Tan has repeatedly signaled that AI revenue growth in FY26 should outpace the already‑rapid 50–60% growth seen in FY25, as this fourth customer and new chip generations come online. [19]
Taken together, Q4 results and guidance reinforce Broadcom’s transition from a diversified chip maker to a central piece of hyperscale AI infrastructure, spanning custom AI accelerators, Ethernet switching, optical interconnects, and VMware‑based private clouds. [20]
Inside the AI chip engine: TPUs, XPUs and Ethernet everywhere
The heart of Broadcom’s AI story is its custom silicon and networking stack for hyperscalers:
- Broadcom co‑designs Google’s Tensor Processing Units (TPUs), which power Google’s latest Gemini 3 AI models, a partnership that has turned TPUs into a high‑volume alternative to Nvidia GPUs for certain workloads. [21]
- MarketWatch reported that analysts expect Broadcom’s seventh‑ and eighth‑generation TPUs to carry estimated average selling prices in the $10,000–$15,000 range per chip, implying substantial revenue leverage as Google and its partners scale AI data centers. [22]
- Beyond Google, Wall Street expects custom AI chip deployments at Meta, Apple, and leading AI labs such as Anthropic or OpenAI to layer on additional demand for Broadcom’s ASIC and XPU platforms over the next several years. [23]
Network infrastructure is the other pillar. Broadcom has rolled out new generations of its Tomahawk and Jericho Ethernet switches and routers, designed to connect AI clusters with hundreds of thousands of nodes. Management argues that Ethernet is winning as the long‑term fabric for AI data centers, in contrast to proprietary interconnects like Nvidia’s NVLink or InfiniBand. [24]
All of this sits atop a massive backlog. At the end of Q3, Broadcom reported about $110 billion in consolidated backlog, with at least half tied to semiconductors and the majority of that related to AI. That backlog gives the company unusually high visibility into 2026 and beyond. [25]
VMware and private cloud: a second growth engine — and a regulatory headache
On the software side, Broadcom is still digesting its $69 billion acquisition of VMware, a deal that turned the company into a heavyweight in private cloud infrastructure and virtualization software.
The numbers suggest the strategy is working:
- Broadcom reported roughly 17% year‑over‑year growth in infrastructure software, driven largely by VMware Cloud Foundation (VCF). [26]
- More than 90% of VMware’s top 10,000 customers have now purchased VCF licenses, and management says the next two years will be focused on deployment, expansion, and layering security, disaster recovery, and AI capabilities on top. [27]
But on December 11, VMware also became a legal flashpoint.
The Cloud Infrastructure Services Providers in Europe (CISPE) — a trade group whose members include many European cloud providers, with Amazon and Microsoft as associate members — formally told the EU General Court that the European Commission erred in approving Broadcom’s VMware deal back in 2023. [28]
CISPE argues that:
- EU regulators failed to properly assess the impact of the deal on competition in server virtualisation software,
- They ignored warnings from customers and industry associations, and
- Their reasoning was flawed under EU merger law. [29]
Broadcom rejects the allegations, and the Commission has said only that it stands ready to defend its decision in court. [30]
For now, the legal challenge doesn’t change VMware’s day‑to‑day integration, but it adds a regulatory overhang at the very moment Broadcom is trying to position VCF as a lower‑cost, AI‑ready alternative to public cloud for large enterprises.
Wall Street’s verdict: Broadcom as a “top pick” for the AI decade
Even before today’s earnings release, Broadcom sat near the top of many AI investors’ shopping lists.
MarketWatch highlighted that Broadcom is a “top pick” on Wall Street going into Q4, mainly because of its custom AI chips and longstanding TPU partnership with Google, plus expectations that TPUs could be offered more broadly to third parties using Google Cloud. [31]
Several high‑profile calls underline the bullish consensus:
- Rosenblatt Securities raised its AVGO price target to $440 from $400 on December 9, maintaining a Buy rating and explicitly citing strong TPU/XPU traction and networking tailwinds. The firm expects Broadcom to continue beating estimates as custom AI accelerators ship in higher volumes. [32]
- HSBC reiterated a Buy rating with a $535 price target, arguing that the Street still underestimates Broadcom’s ASIC (custom chip) upside even after Alphabet’s Gemini 3 launch pushed analysts to lift their AI revenue forecasts. [33]
- A Barchart analysis noted that out of roughly 40 analysts covering AVGO, 34 rate the stock a “Strong Buy” and only three a “Hold,” with the average target near the current share price and the high end again around $535. [34]
All of this is happening as AVGO joins the ranks of trillion‑dollar tech giants, with a market cap near $1.9–2.0 trillion and a share price that has climbed more than 75% in 2025 alone, even before factoring in today’s after‑hours move. [35]
“Primed for disappointment”? The valuation risk after a 180% rally
Not everyone is comfortable with how quickly AVGO stock has levitated.
A Bloomberg analysis, republished by The Edge Singapore, notes that:
- Broadcom’s stock has soared more than 180% from its April 4 low, and is up about 35% since its last earnings report in September, closing at successive record highs this week. [36]
- The shares now trade at roughly 42x forward earnings, more than double their 10‑year average multiple of 17x and richer than every Magnificent Seven stock except Tesla. [37]
Peter Sorrentino of Huntington National Bank, which owns Broadcom shares, summed up the concern by saying the stock looks “primed for disappointment”, arguing that investors might be “a little over their skis” after such a furious run. His firm has not been adding to its AVGO position during the latest rally. [38]
Other portfolio managers quoted in the piece emphasize:
- The extraordinary expectations built into the stock, and
- The risk that even a “beat and raise” quarter could trigger profit‑taking if guidance doesn’t unlock yet another AI surprise, like last quarter’s reveal of a $10+ billion XPU customer. [39]
Options markets echo that tension. Data tracked by research platforms suggests:
- Over the last dozen earnings cycles, the options market has implied an average post‑earnings move of about ±6.1% for AVGO, and
- For this quarter, traders were pricing in something around a ±7% swing, highlighting just how much uncertainty surrounds a stock trading near all‑time highs. [40]
In that light, today’s ~3% after‑hours jump looks like a modest relief rally rather than a euphoric re‑rating — at least so far. [41]
The Oracle effect and broader tech sentiment
Today’s story is also happening against a choppy backdrop for big‑cap tech:
- Oracle’s disappointing cloud guidance and soaring AI capex triggered a sharp sell‑off in its shares, dragging down AI‑linked infrastructure stocks — including Broadcom — earlier in the session. [42]
- Semiconductor ETFs spent much of the day in the red even as the Dow and S&P 500 flirted with or hit record highs, reflecting investors’ nervousness about how sustainable AI data‑center spending will be at current levels. [43]
Broadcom’s steady beat‑and‑raise track record and AI‑heavy backlog help explain why investors are still willing to pay a premium. But it also means any sign of slowing AI orders, margin compression, or VMware friction could be punished quickly.
What today’s Broadcom news means for investors
For investors watching AVGO — or the broader AI trade — today’s news changes a few things and reinforces others.
What the bulls will highlight
- AI is now a majority of Broadcom’s semiconductor revenue and is still growing at very high double‑digit rates, with Q1 guidance calling for another doubling year over year. [44]
- A fourth large XPU customer with $10+ billion of orders materially improves Broadcom’s 2026 and 2027 AI revenue trajectory. [45]
- VMware Cloud Foundation penetration above 90% among top customers gives Broadcom a sticky, high‑margin software base to pair with its AI chips. [46]
- Multiple major banks — from Goldman Sachs to UBS, HSBC, and Rosenblatt — have raised price targets into the $435–$535 range, indicating continued institutional conviction in the AI thesis. [47]
What the bears (and cautious holders) will watch
- Valuation risk: At roughly 40x forward earnings and over 100x trailing earnings, Broadcom leaves little room for execution missteps or macro shocks. [48]
- Customer concentration: A large chunk of today’s AI revenue is still tied to a small club of hyperscalers such as Google and a handful of cloud or AI providers. Any change in their in‑house chip strategies could ripple through Broadcom’s order book. [49]
- Regulatory overhang: The CISPE challenge to the VMware deal raises the odds that Broadcom might face behavioral remedies or deeper scrutiny in Europe just as it tries to push more enterprises onto VMware Cloud Foundation. [50]
- Macro and AI‑spending cycles: Oracle’s stumble is a reminder that AI capex can be lumpy, and that investors may rethink valuations if hyperscalers start to slow their build‑outs, even temporarily. [51]
Bottom line
Broadcom’s Q4 2025 report largely delivered what the market wanted: a solid beat on revenue and earnings, an upbeat AI‑driven outlook for Q1 2026, and more evidence that VMware is morphing into a powerful private‑cloud platform for AI workloads.
But with AVGO stock already up roughly 180% from its spring lows and trading at premium multiples, the bar for future quarters is now extraordinarily high. Even small disappointments — on AI demand, margins, or VMware integration — could turn today’s winners into future laggards.
For now, Broadcom remains one of the purest large‑cap ways to play the AI infrastructure boom, but it’s also becoming one of the clearest tests of how much AI optimism the market is willing to price in upfront.
References
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