AVGO
Broadcom
Hybrid Industrial
★ Quality 73/100Price today
$357.90
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What this business is made of
The business
Broadcom forges the custom silicon for Google and Meta.
Broadcom designs custom semiconductors (ASICs/XPU) for hyperscalers and sells networking infrastructure, plus enterprise software after swallowing VMware. It charges for high-margin chips and, now, for recurring software licenses. Revenue FY2025 $63.9B, GM 68%, FCF $26.9B.
In AI XPUs they form an effective duopoly: they design the silicon for Google's TPUs and Meta's MTIA, contracts that take years to migrate away from. In networking they dominate datacenter switching. The moat is real but it's not an eternal toll booth: it depends on a few giant customers and on keeping winning each design.
Revenue history
From $27.5B to $63.9B in 4 years — nearly 2.3x its size. Selling more and more is the base of everything else.
Where each $100 of sales goes
Revenue $63.9B · FY2025
Of every $100 in sales, $64 goes to costs and operations; $36 is left as net profit (36% margin).
Catalysts and risks
AI semis $8.2B in Q1 FY2026, double year-over-year; segment running at ~$18B annualized (+74%).
VMware integration migrating to subscription: pushes software margin toward the 70s and deleverages the $69B debt.
15th consecutive year raising the dividend ($2.60); FCF +39% gives ammunition to keep going.
Brutal customer concentration: if Google or Meta bring it in-house or switch suppliers, the AI growth deflates.
Net debt of $45.8B (1.7x FCF) from VMware; an operating stumble squeezes harder than it looks.
Reported net income $0.0B: merger amortization and charges distort GAAP; the case depends on normalized FCF, not the headline.
Charlie's note
“Hock Tan is a ruthless capital allocator, and here that's a compliment. The business is magnificent; the price at 20x already discounts much of the AI optimism, so only pay when the market has a bad day.”
Analysis · June 2026
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