Euphoria on Broadcom shares 📈 Will the company challenge Nvidia? ❓

Broadcom (AVGO.US) released its third-quarter results, which significantly exceeded market expectations and confirmed the company's growing role in the artificial intelligence segment. The stock rose 10.5% in pre-market trading on Wall Street after the company announced a partnership with OpenAI to produce custom AI accelerators. Management emphasized that the outlook for fiscal 2026 is much better than previously estimated, thanks to new and significant orders.

The company's revenues are growing steadily from quarter to quarter, with a similar trend in return on invested capital. At the same time, the weighted average cost of capital is also rising, but not as much as the company's return. This means that the company is earning more on its investments than it costs to finance them, leading to increased shareholder value. Source: XTB Research

Broadcom's results have been positively assessed by analysts, who point out that the company continues to see strong growth in the AI segment despite a slowdown in other parts of the semiconductor market. Particular attention is drawn to the growing share of revenue from dedicated ASIC chips for its two largest customers and the expansion of its portfolio through cooperation with OpenAI. This is an important signal that Broadcom is effectively diversifying its sources of income and strengthening its position in competition with Nvidia. Furthermore, the management board has confirmed that CEO Hock Tan will remain in his position until at least 2030, which gives the company strategic stability.

Results for Q3 FY2025:

• Total revenue: $15.95 billion (forecast: $15.84 billion)
• Earnings per share (EPS, adjusted): $1.69 (forecast: $1.67)
• Semiconductor revenue: $9.17 billion (forecast: $9.1 billion)
• Revenue from infrastructure equipment and software: $6.79 billion (forecast: $6.75 billion)
• Revenue from AI semiconductors: $5.2 billion (forecast: $5.11 billion)
• Adjusted EBITDA: $10.7 billion (forecast: $10.46 billion)
• R&D expenditure: $1.48 billion (forecast: $1.53 billion)
• CapEx: $142 million (forecast: $155.8 million)

Forecasts for Q4 FY2025:

• Revenue: approx. USD 17.4 billion (forecast: USD 17.05 billion)
• Adjusted EBITDA margin: 67%
• Revenue from AI semiconductors: $6.2 billion (forecast: $5.82 billion)
• Revenue growth dynamics y/y: +24%
• Expected increase in the scale of deliveries for partners in the AI sector

Outlook for the coming quarters and 2026:

• The management board forecasts significant acceleration in growth in fiscal year 2026, particularly in the AI segment.
• The new partnership with OpenAI is expected to generate over $10 billion in orders and create an alternative to Nvidia chips.
• The company expects AI revenues to reach approximately $20 billion in fiscal year 2025, with growth in 2026 exceeding previous estimates (currently 50-60% year-on-year).
• Sustained momentum in data center infrastructure thanks to investments by hyperscalers.
• Hock Tan's stable leadership until 2030 is intended to ensure continuity in the consolidation strategy and expansion in AI.

Even before the start of trading, the company's shares had gained nearly 32% since the beginning of the year, with a price/earnings ratio of 76. Investors remain optimistic about the company, as evidenced by the nearly 11% increase in the share price before the opening. Source: xStation