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Is Broadcom (AVGO) the Other AI Trade?
By IPO Edge Editorial Staff
Broadcom’s (AVGO) AI business is growing faster than almost anyone expected.
Last quarter, AI semiconductor revenue hit $10.8 billion, up 143% year over year. Management expects that to reach $16.0 billion this quarter, a jump of more than 200%.
That is the kind of number that gets noticed.
Broadcom landed third among semiconductor searches by financial pros last month, behind only NVIDIA and Micron, according to our TrackStar data.
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The stock isn’t cheap. But the growth is real, the cash flow is enormous, and the AI story is just getting started.
Here’s our take.
Broadcom’s Business
Broadcom designs the custom chips and networking gear that move data inside the world’s largest data centers.
What sets it apart is range. The company holds roughly 18,000 patents across 24 category-leading divisions, spanning silicon and software.
Its customers include hyperscale cloud providers, telecom carriers, and enterprise IT departments. Broadcom spent $11.0 billion on R&D in FY25 to keep that edge sharp.
Broadcom segments its business into the following areas:
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Semiconductor Solutions (68% of total revenues) – Custom AI accelerators (XPUs), AI networking, broadband, server and storage chips, wireless, and industrial silicon
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Infrastructure Software (32% of total revenues) – Cybersecurity, enterprise and mainframe software, Fibre Channel networking, and the VMware private cloud platform
Second quarter revenue rose 48% year over year to a record $22.2 billion. Semiconductor revenue jumped 79% as AI demand surged, while software grew a steadier 9%.
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GAAP net income nearly doubled to $9.3 billion. The company guided third quarter revenue to roughly $29.4 billion, up 84% from a year ago.
The growth engine here is custom silicon. Broadcom co-designs AI chips with a handful of giant cloud customers, who want alternatives to off-the-shelf GPUs.
That model locks in multi-year demand and keeps margins high, since Broadcom owns the intellectual property rather than the manufacturing.
On the software side, the VMware integration continues to lift profitability as the company shifts customers to subscriptions and trims costs.
Financials
Source: Stock Analysis
Broadcom’s revenue climbed from $51.6 billion in FY24 to $63.9 billion in FY25, and trailing twelve-month sales now sit at $75.5 billion, up 32.3% year over year.
