Hook & thesis
Broadcom's FY2025 quarter-to-quarter numbers remove the ambiguity that hung over the stock in prior periods. Revenue accelerated from $14.916B in Q1 to $18.015B in Q4, and operating cash flow remains robust (Q3 operating cash flow of $7.166B). Those are not incremental beats; they are an earnings revision story driven by stronger-than-expected demand for Broadcom's custom AI silicon and the stickier recurring software businesses.
That combination - accelerating revenue, >$7B quarterly operating cash flow, expanding free cash and a rising dividend (most recently a $0.65 quarter declared 12/09/2025 and paid 12/31/2025) - supports an upgrade to Strong Buy. For traders, this is actionable: enter on strength or in a staged buy on dips toward meaningful support, keep a strict stop, and target the near-term resistance created by 52-week highs.
What Broadcom does and why the market should care
Broadcom is a large fabless semiconductor designer that has expanded into infrastructure software via acquisitions. Its chips address computing, wired and wireless connectivity and it holds a meaningful position in custom AI chips used for training and inference. On the software side it sells virtualization, infrastructure and security products to enterprises and governments. The business mix matters: semiconductors provide cyclical upside as data center and AI spending accelerates, while software provides recurring revenue and margin stability.
Why that matters now: the quarterly flow of results shows sequential top-line acceleration through 2025 and stronger margins, implying revenue and earnings revisions - the classic setup for re-rating, particularly when free cash flow is large and management returns cash to shareholders.
Numbers that matter (from recent quarters)
- Q1 FY2025 (ended 02/02/2025): Revenues $14.916B; net income $5.503B; diluted EPS 1.14.
- Q2 FY2025 (ended 05/04/2025) - filing accepted 06/11/2025: Revenues $15.004B; net income $4.965B; diluted EPS 1.03; operating cash flow $6.555B.
- Q3 FY2025 (ended 08/03/2025) - filing accepted 09/10/2025: Revenues $15.952B; operating income $5.887B; net income $4.14B; operating cash flow $7.166B.
- Q4 FY2025 (reported 12/11/2025): RevenueActual $18.015B; EPSActual $1.95 for the quarter - a meaningful step-up versus earlier quarters.
Sequential revenue: 02/02/2025 $14.916B -> 05/04/2025 $15.004B -> 08/03/2025 $15.952B -> 12/11/2025 $18.015B. That pattern is a clear acceleration in the back half of the fiscal year.
Balance sheet and cash flow context
At Q3 year-to-date the balance sheet shows assets of $165.621B and equity of $73.277B with liabilities of $92.344B. Noncurrent assets are large ($140.623B) and intangible assets are meaningful ($34.344B), reflecting the company's software and acquisition footprint. Quarterly operating cash flow remains a highlight - $7.166B in Q3 - providing flexibility for dividends, buybacks and debt management.
Valuation framing
The dataset doesn't include an explicit market capitalization figure; therefore I won't invent one. Using the company-reported quarterly diluted EPS (Q1 1.14, Q2 1.03, Q3 0.85, Q4 1.95) gives an FY2025 diluted EPS run-rate of approximately $4.97 (sum of the four quarters). With the most recent last trade/close around $352.13, that implies a trailing-ish P/E near 71x (352 / 4.97). That multiple is rich on a raw earnings basis, but several points justify a premium:
- Rapid sequential revenue acceleration into Q4 (18.015B) and strong free-cash generation ($7B+ quarterly operating cash flow) support a multiple premium versus a purely cyclical chip vendor.
- Software revenues - higher gross margins and recurring contracts - reduce headline cyclicality and can support higher multiple persistence.
- Dividend and buyback programs plus the stock split history (10-for-1 executed 07/15/2024) help liquidity and shareholder returns.
That said, the high nominal P/E increases sensitivity: even modest disappointment in growth or margin guidance can compress the stock quickly. I therefore frame this as a trade that pays to be tactical and risk-managed rather than a blind 'buy and hold' at any price.
Actionable trade idea (upgrade to STRONG BUY)
Trade type: Long (staged).
Time horizon: Swing to position (3-12 months) - we expect catalysts and continued earnings revisions over this window.
Risk level: Medium-High (rich valuation but strong execution and cash flow).
Entry:
- Primary entry: Buy 1/2 position on strength above $355.00 (momentum entry near the most recent intraday range).
- Staggered add: Add remaining 1/2 on pullbacks to $320.00 - $330.00 (range support and ~7-10% downside cushion from current). If you prefer a single entry, use $335 - $345 as a compromise.
Stop-loss:
- Initial stop at $310.00 (about 12% below current market price). This level sits below recent consolidation and protects capital against a sharper multiple contraction.
Targets:
- Near-term target (first take-profit): $390.00 - corresponds to re-test of the recent run toward 52-week highs and near the prior swing area that preceded the latest acceleration.
- Secondary target: $430.00 - captures a continued multiple expansion if revenue and margins continue improving and sentiment remains positive.
- Stretch target: $480.00 - for investors who want to hold through further AI-driven re-rating and continued software integration upside.
Position sizing: keep any single trade to a reasonable percentage of total risk capital (we recommend risking no more than 1-2% of portfolio on the $310 stop with the size adjusted accordingly).
Catalysts to drive the trade
- Continued AI infrastructure spending - custom AI chip demand and higher ASPs could drive >Q4-like revenue growth into 2026.
- Software revenue stickiness - recurring revenue and margin leverage from virtualization and security suites.
- Quarterly earnings where management guides above street expectations - the company has a recent pattern of sequential beats and revisions.
- Capital returns - additional dividend increases or accelerated buybacks funded by strong operating cash flow.
Risks and counterarguments
Every trade has downside; with Broadcom the principal risks are both macro/cyclical and company-specific.
- Valuation sensitivity - at a trailing/near-trailing P/E in the 60s-70s range using FY2025 quarter sums, the stock is vulnerable to multiple compression if growth slows.
- Concentration and competition risk - the AI chip market is intensely competitive (incumbents and new entrants can win design wins and share) and customers could shift spend patterns.
- Leverage & interest expense - noncurrent liabilities remain large (Q3 noncurrent liabilities $75.64B) and interest expense is meaningful (interest expense operating $807M in Q3), leaving earnings exposed to higher rates or refinancing dynamics.
- Integration & execution risk - large software acquisitions and the complexity of integrating products (and retaining enterprise customers) could hit margins if execution slips.
- Counterargument: Given the rich multiple, a conservative investor could argue that it's better to wait for a pullback or for clearer evidence of multi-quarter sustained outperformance before adding materially. If the stock simply re-rates on a single strong quarter without follow-through, downside is possible.
What would change my mind
I will reassess this Strong Buy thesis if any of the following occur:
- Revenue growth decelerates sequentially for two consecutive quarters (e.g., Q1 to Q2 style declines) or Q4 proves a one-off spike rather than the start of sustained acceleration.
- Operating cash flow drops materially (a sustained decline from the $7B quarterly level) or the company materially slows capital returns without a clear strategic reason.
- Interest expense and leverage dynamics materially worsen the credit profile (e.g., evidence of refinancing at materially higher rates that compress net income).
Bottom line
Broadcom is a strong buy in our view because fiscal 2025 shows clear sequential revenue acceleration culminating in a $18.015B quarter, robust operating cash flow (> $7B in Q3) and rising shareholder returns. The business mix of high-value custom AI silicon plus recurring software revenue creates a durable cash flow profile that merits a premium - but that premium comes with higher valuation sensitivity. For traders that accept that dynamic, use a staged long entry, a disciplined stop at $310 and targets of $390/$430 (stretch $480). If the company fails to sustain the revenue/margin momentum, the stretch valuation will be hard to defend and we'd downgrade accordingly.
Disclosure: This is an analyst trade idea based on company filings and public data; it is not personalized financial advice.
Key filings referenced: Q3 FY2025 filing accepted 09/10/2025; Q2 FY2025 filing accepted 06/11/2025; Q1 FY2025 filing accepted 03/12/2025; Q4 FY2025 earnings reported 12/11/2025. Dividend declaration referenced 12/09/2025.