Company of the week - Broadcom Inc. (04.09.2025)

Broadcom Inc., headquartered in San Jose, California, is one of the most significant companies in the semiconductor and infrastructure software markets, playing a key role in the global technology industry. The current form of the company, shaped by a series of mergers and acquisitions—most notably the merger of Broadcom Corporation with Avago Technologies in 2016—enabled the company to create one of the most diversified and powerful technology entities in the world.

Currently, Broadcom is a leading supplier of semiconductor solutions for telecommunications infrastructure, data centers, mobile devices, and the industrial market, as well as an important player in the enterprise software sector. The company’s market capitalization is approximately $1.4 trillion, placing it among the largest technology companies globally, alongside NVIDIA, Microsoft, and Amazon.

Broadcom also holds significant weight in the NASDAQ 100 index, one of the most important stock indices encompassing the largest and most influential technology companies listed on the U.S. stock exchange. Due to its high market capitalization, Broadcom represents a substantial portion of this index, meaning that any significant change in its stock price can cause noticeable fluctuations in the overall index value. In practice, this means Broadcom is not only a key player in the semiconductor market but also has a real impact on investor sentiment and the direction of technology markets. This strong position within the NASDAQ 100 underscores the company’s importance as one of the growth engines for the entire technology sector.

Broadcom’s Product Portfolio – Key Solutions and Their Applications

Broadcom’s portfolio is one of the broadest and most advanced in the semiconductor and infrastructure software industry. The company provides solutions that form the foundation of global digital infrastructure, ranging from telecommunications networks and data centers to consumer devices and advanced IT security systems.

Network Switches and Ethernet Controllers
Broadcom is a world leader in networking chips, offering Trident 4 and StrataXGS switches as well as Ethernet controllers like the BCM5719. These products enable fast and energy-efficient data transmission in data centers, cloud environments, and corporate networks—crucial for modern internet infrastructure.
 

Communication Chips and 5G Chips
Broadcom supplies advanced Wi-Fi 6E and Bluetooth chips (e.g., BCM4389) and 5G modems, supporting fast and stable connections in smartphones and routers. These technologies enable the development of 5G networks.
 

Memory Controllers and Storage Solutions
Broadcom’s MegaRAID controllers and NVMe SSDs enhance data storage performance and reliability in servers and data centers, ensuring fast access to information in demanding environments such as databases and streaming platforms.
 

Analog Chips and Sensors
Broadcom offers optical sensors, photodiodes, and power management chips used in consumer electronics, automotive, and industrial sectors. These products improve energy efficiency and functionality of modern devices.
 

Software and IT Security
Broadcom also develops enterprise software, including CA Technologies for IT infrastructure management and Symantec Enterprise Security for cybersecurity. These solutions support automation and protection of critical business processes.
 

Specialization in Custom ASIC Chips

Broadcom focuses on designing ASICs (Application-Specific Integrated Circuits), specialized chips optimized for specific tasks, providing high performance and energy efficiency. This specialization is a significant competitive advantage, allowing the delivery of key solutions for telecommunications infrastructure, data centers, and Ethernet networks.

In contrast, companies like NVIDIA and AMD mainly focus on general-purpose processors such as CPUs and GPUs, which are used in gaming, artificial intelligence, and data processing. By concentrating on niche but strategically important technologies, Broadcom maintains a strong market position and generates stable revenues.

Competition and Market Risks

Broadcom operates in a dynamic and highly competitive semiconductor industry, focusing on Ethernet networks, wireless communication, storage, and enterprise software segments. The market is characterized by rapid innovation and growing demand for network bandwidth, 5G technology, cloud computing, and the Internet—all factors creating favorable conditions for the company’s growth.

The company faces strong competition from key players like Cisco Systems, Intel, Qualcomm, and Marvell Technology. Cisco and Intel primarily compete with Broadcom in network hardware and storage controllers, while Qualcomm and MediaTek compete in communication chips and modems. Since early 2025, Broadcom has clearly outperformed competitors financially, with a cumulative return of approximately 80%, compared to about 10% for Cisco, 5% for Intel, and almost no growth for Qualcomm. For comparison, the NASDAQ 100 index rose about 20%. These figures highlight Broadcom’s strong position and the effectiveness of its strategy.

However, the company also faces significant risks. One is the rapid pace of technological progress requiring continuous investment in development and innovation. Delays or failures in implementing new technologies could weaken Broadcom’s market position. Intense competition may lead to price pressures and market share loss, especially if new entrants bring innovative solutions.

Another major risk is dependence on key customers. Broadcom generates a substantial portion of its revenue through partnerships with large cloud service providers and telecom operators. Loss or reduction of orders from these partners could severely impact financial results. Additionally, global supply chains face disruptions due to component shortages and geopolitical tensions, potentially limiting Broadcom’s production capacity. Cybersecurity threats also pose risks to data security, reputation, and operational stability. Moreover, increasingly stringent data protection and security regulations may raise operating costs and require additional expenditures.

Financial Results and Forecasts

Broadcom’s financial results for Q2 2025:

• Revenue: $15,004 million
   
• Net Income: $4,965 million
   
• Gross Margin: 68%
   
• Operating Margin: 39%
   
• Net Profit Margin: 33%
   
• Gross Profit: $10,197 million
   
• Adjusted EBITDA: $10,001 million
   

The artificial intelligence (AI) segment is currently Broadcom’s key growth driver. In Q2 2025, the company achieved record AI-related revenues of $4.4 billion, a 46% increase compared to the same period last year. This dynamic growth is fueled by investments from major market players like Google and Meta, who are rapidly expanding their data centers and network infrastructure using Broadcom’s advanced technologies.

Analysts’ forecasts for Q3 2025 indicate further revenue growth to approximately $15.8 billion. The projected gross margin of 78.2% demonstrates high production and sales efficiency, confirming Broadcom’s technological edge and the high added value of its products. Adjusted EBITDA is estimated at $10.46 billion, confirming strong operational profitability. Net income is expected to reach $8.22 billion, with a net margin of 51.9%, showing that Broadcom is not only growing dynamically but also managing costs effectively, resulting in a very healthy profit structure. The market also expects earnings per share (EPS) of $1.67.

Q3 2025 analyst estimates:

• Adjusted Revenue: $15,843 million
   
• Adjusted EBITDA: $10,463.3 million
   
• Gross Margin: 78.2%
   
• Adjusted Net Income: $8,220 million
   
• Net Profit Margin: 51.9%
   
• Adjusted EPS: $1.67
   

Currently, Broadcom is valued by the market at very high multiples, with a Price/Earnings (P/E) ratio of about 110.31 and an EV/EBITDA ratio of 49.35. Such a high valuation reflects investors’ enormous expectations for the company’s future growth, especially in the AI segment, seen as a key growth engine.

However, analysts forecast significantly lower multiples for the coming quarters and next year, with a predicted P/E dropping to around 35 and EV/EBITDA stabilizing between 30 and 35. This scenario suggests that the market expects valuation normalization and a correction from current elevated levels. The decline in these multiples is a natural process of moving from speculative growth to a more mature, fundamentals-based company valuation.

It should be emphasized that such a high valuation carries significant risk. If Broadcom fails to deliver results in line with market expectations or unforeseen factors disrupt growth, investors may react quickly with stock price corrections. The high valuation means there is little margin for error, and failure to meet targets could lead to sharp declines in company value.

Valuation Overview

Let’s examine Broadcom Inc.’s valuation using the discounted cash flow (DCF) method. Please note that this valuation is for informational purposes only and should not be considered investment advice or a precise target stock price.

Our assumptions include an average annual revenue growth rate of approximately 20-30% during the forecast period. This is based on the growing importance of the AI segment and broad application of ASIC chips and infrastructure solutions driving demand for Broadcom products. The company consistently strengthens its position in key technological areas, and forecasts indicate stable and rapid growth in upcoming quarters.

A key component of the valuation was determining the weighted average cost of capital (WACC). Based on current market data and the semiconductor industry specifics, the cost of equity was estimated at about 9%. Broadcom has a moderate level of debt, resulting in a relatively low cost of debt contribution to overall WACC. The model assumes a terminal value based on 3% annual revenue growth, with other parameters based on average financial results from the past five years.

As a result of these assumptions, the company’s valuation came to $203.5 per share—over 33% lower than the current market closing price. It should be noted that the semiconductor sector, especially the AI solutions segment, is among the fastest-growing and most dynamic technology fields. Therefore, valuations of companies like Broadcom often exceed traditional models based on historical data.

Investors consider future growth potential, innovation, and Broadcom’s strategic role in the AI infrastructure market, leading to higher stock prices than those suggested by classic valuation models. The current market valuation thus reflects not only current financial results but also expectations for further expansion, technological strengthening, and rapid growth in coming years.

For this reason, while DCF remains a valuable analytical tool, investing in semiconductor and AI companies also requires considering market factors, innovation, and sector dynamics, which may cause significant differences from fundamental valuations.

The valuation’s value largely depends on assumptions about revenue growth rates and capital costs. Below is a scenario matrix illustrating the impact of changes in these parameters on the company’s valuation.

Source: xStation5

Chart Analysis

Source: xStation5

From a technical analysis perspective, Broadcom’s shares are in a clear uptrend, confirmed by dynamically rising exponential moving averages (EMA 25, 100, and 200), forming a classic bullish sequence. The current chart structure does not indicate weakening of this trend. Prices remain above all key averages, and any corrections are shallow and quickly absorbed by buyers. If demand for technologies Broadcom specializes in remains high and market conditions stay favorable, the scenario of further medium-term gains remains very plausible.

However, it should be remembered that stock valuations are currently very high, increasing the risk of a sharp price correction if the company’s financial results fail to meet investor expectations. In such a scenario, a significant and rapid market correction could be expected.