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    AVGO
    Earnings call· Nov 2025(Q4 FY25)

    Broadcom Inc. AVGO

    Dec 11, 2025 Source

    Executive summary

    Broadcom Q4 FY25 — Record AI Semiconductor and Infrastructure Software Growth

    Broadcom concluded a strong Q4 and FY25, driven by accelerating AI semiconductor demand and robust Infrastructure Software growth, particularly from VMware. The company sees continued momentum in AI, with a substantial backlog and strong Q1 FY26 guidance, though gross margins are expected to be impacted by product mix. Management remains confident in operating leverage despite gross margin shifts.

    Highlights

    5

    • Consolidated revenue grew 24% YoY to a record $64 billion in FY25, driven by AI semiconductors and VMware.

    • AI revenue grew 65% YoY to $20 billion in FY25, driving semiconductor revenue to a record $37 billion.

    • Infrastructure Software revenue grew 26% YoY to $27 billion in FY25, driven by strong VMware Cloud Foundation adoption.

    • Q4 FY25 total revenue was a record $18 billion, up 28% YoY and above guidance.

    • Total AI backlog is in excess of $73 billion, expected to be delivered over the next 18 months.

    Concerns

    3

    • Non-AI semiconductor end markets (excluding broadband) were down YoY in Q4 FY25 due to limited recovery in enterprise spending.

    • Consolidated gross margin is expected to decrease by approximately 100 basis points sequentially in Q1 FY26 due to a higher mix of AI revenue.

    • Non-GAAP tax rate for Q1 and FY26 is expected to increase from 14% to approximately 16.5% due to global minimum tax and geographic mix shift.

    Guidance & targets

    14
    CategoryTargetConfidence
    Consolidated Revenue
    $19.1 billion
    high materiality
    High
    Adjusted EBITDA
    approximately 67% of revenue
    medium materiality
    High
    Semiconductor Revenue
    approximately $12.3 billion
    high materiality
    High
    AI Semiconductor Revenue
    $8.2 billion
    high materiality
    High
    Infrastructure Software Revenue
    approximately $6.8 billion
    medium materiality
    High
    Consolidated Gross Margin
    down approximately 100 basis points sequentially
    medium materiality
    High
    Infrastructure Software Revenue Growth
    low double-digit percentage
    medium materiality
    Medium
    AI Revenue Growth
    continue to accelerate and drive most of our growth
    high materiality
    High
    Non-AI Semiconductor Revenue
    stable
    medium materiality
    Medium
    Non-GAAP Tax Rate
    increase from 14% to approximately 16.5%
    medium materiality
    High
    Quarterly Common Stock Cash Dividend
    $0.65 per share
    medium materiality
    High
    Annual Common Stock Dividend
    $2.60 per share
    medium materiality
    High
    Share Repurchase Program Authorization
    $7.5 billion remains
    medium materiality
    High
    Non-AI Semiconductor Revenue Forecast
    approximately $4.1 billion
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Semiconductor Solutions
    Robust growth driven by AI semiconductors. Operating expenses increased 16% YoY due to increased R&D investment in leading-edge AI semiconductors.
    AI semiconductor revenue: $6.5 billion (up 74% YoY)Non-AI semiconductor revenue: $4.6 billion (up 2% YoY, up 16% sequentially)
    		$11.1 billion35%—59% operating margin
    Infrastructure Software
    Revenue above outlook of $6.7 billion. Gross margin improved from 91% a year ago. Operating margin improved from 72% a year ago, reflecting completion of VMware integration.
    Total contract value booked: exceeded $10.4 billion (vs $8.2 billion a year ago)
    		$6.9 billion19%—93% gross margin, 78% operating margin
    Semiconductor Solutions (FY25)
    Full fiscal year revenue driven by AI semiconductors.
    		$36.9 billion22%——
    Infrastructure Software (FY25)
    Full fiscal year revenue driven by strong adoption of VMware Cloud Foundation.
    		$27 billion26%——

    Operational metrics

    24
    Consolidated Revenue
    $63.9 billion24% YoY organic growth
    FY25

    Record revenue for the fiscal year.

    AI Revenue
    $20 billion65% YoY growth
    FY25

    Driving semiconductor revenue to a record $37 billion for the year.

    Adjusted EBITDA
    $43 billion
    FY25

    Full fiscal year adjusted EBITDA.

    Cash Returned to Shareholders
    $17.5 billion
    FY25

    Total cash returned to shareholders for the fiscal year.

    Consolidated Revenue
    $18 billion28% YoY
    Q4 FY25

    Record total revenue, above guidance.

    Consolidated Adjusted EBITDA
    $12.2 billion34% YoY
    Q4 FY25

    Record adjusted EBITDA, above 67% guidance.

    Consolidated Gross Margin
    77.9%
    Q4 FY25

    Better than originally guided on higher software revenues and product mix within semiconductors.

    Consolidated Operating Expenses
    $2.1 billion
    Q4 FY25

    Total operating expenses for the quarter.

    Consolidated Operating Income
    $11.9 billion35% YoY
    Q4 FY25

    Record operating income for the quarter.

    Consolidated Operating Margin
    66.2%up 70 bps sequentially
    Q4 FY25

    Increased on favorable operating leverage.

    Depreciation
    $148 million
    Q4 FY25

    Excluded from Adjusted EBITDA calculation.

    Infrastructure Software Gross Margin
    93%vs 91% a year ago
    Q4 FY25

    Improved from prior year.

    Infrastructure Software Operating Margin
    78%vs 72% a year ago
    Q4 FY25

    Improved from prior year, reflecting completion of VMware integration.

    Capital Expenditures
    $237 million
    Q4 FY25

    Capital expenditures for the quarter.

    Days Sales Outstanding
    36 dayscompared to 29 days a year ago
    Q4 FY25

    DSO for the quarter.

    Inventory
    $2.3 billionup 4% sequentially
    Q4 FY25

    Inventory balance at quarter end.

    Days of Inventory on Hand
    58 dayscompared to 66 days in Q3
    Q4 FY25

    Continued discipline in inventory management.

    Cash and investments balance
    $16.2 billionup $5.5 billion sequentially
    Q4 FY25

    Cash balance at quarter end, driven by strong cash flow generation.

    Gross Principal Fixed Rate Debt
    $67.1 billion
    Q4 FY25

    Debt profile at quarter end.

    Quarterly Common Stock Cash Dividend
    $0.59
    Q4 FY25

    Dividend paid to stockholders in Q4.

    Non-GAAP Diluted Share Count
    approximately 4.97 billion shares
    Q1 FY26

    Expected share count, excluding potential impact of share repurchases.

    AI Sequential Growth
    $1.7 billion
    Q1 FY26

    Analyst's calculation of sequential growth in AI revenue, confirmed by management.

    Rack Revenue
    $21 billion
    H2 FY26

    Analyst's estimate of potential rack revenue in the second half of FY26, acknowledged by management as a possibility depending on compute capacity needs.

    AI Backlog Component Split (non-XPU)
    $20 billion
    next 18 months

    Portion of total AI backlog attributed to non-XPU components like switches, DSPs, and optical components.

    Industry KPIs

    7
    MetricValueDetails
    Lead times6 months to a yearmonths
    Backlog order bookin excess of $73 billionUSD
    Ai data center revenue$6.5 billionUSD
    Bookings net order intakeexceeded $10.4 billionUSD
    Design wins socket pipelineFifth XPU customercustomer
    Inventory channel inventory$2.3 billionUSD
    End market segment revenue mixQ4 FY25 Semiconductor: AI $6.5B; non-AI $4.6BUSD

    Orderbook & backlog

    3
    AI Backlog (Total)in excess of $73 billionQ4 FY25

    Expected to be delivered over the next 18 months; more bookings expected over this period.

    AI Networking Backlog (Switches)exceeds $10 billionQ4 FY25

    Driven by the latest 102-terabit per second Tomahawk 6 switch booking at record rates.

    Infrastructure Software Backlog$73 billionQ4 FY25

    up from $49 billion a year ago

    Ended the year with this backlog.

    Deals & partnerships

    2
    Fifth XPU CustomerOrder for custom AI accelerators (XPUs)$1 billion

    New customer placed a $1 billion order for delivery in late 2026, embarking on a multi-year journey for their own XPUs.

    OpenAIAgreement for 10 gigawatts of compute capacity and XPU program developmentthrough 2029

    Agreement to be aligned on developing 10 gigawatts for OpenAI over the '27 to '29 timeframe. This is separate from an XPU program being developed with them, which is at a very advanced stage and will have a committed element.

    Capital programs

    1
    Advanced Packaging Facilityunderway

    Benefit: partially in-sourcing advanced packaging

    Building a fairly substantial facility in Singapore purely to address advanced packaging for supply chain security and delivery, especially for multi-chip custom accelerators.

    Risks & headwinds

    3
    Limited recovery in enterprise spendingQ4 FY25, expected to be stable in FY26

    Non-AI semiconductor end markets (excluding broadband) were down YoY in Q4 FY25

    Mitigation: Broadband showed solid recovery; no further deterioration in demand expected.

    Non-GAAP tax rate increaseQ1 FY26 and FY26

    Increase from 14% to approximately 16.5%

    Mitigation: Impact of global minimum tax and shift in geographic mix of income.

    Consolidated gross margin dilutionQ1 FY26

    Down approximately 100 basis points sequentially

    Mitigation: Primarily reflecting a higher mix of AI revenue; operating leverage expected to drive operating margin dollars higher.

    What to watch in Q1 FY26

    5

    AI Revenue Acceleration

    Q2 FY26 and beyond
    CurrentQ1 FY26 AI semiconductor revenue expected to double YoY to $8.2 billion
    TargetContinued acceleration of AI revenue growth beyond Q1 FY26

    Why it matters

    AI revenue is the primary growth driver; sustained acceleration is key to the investment thesis.

    directionally, we expect AI revenue to continue to accelerate and drive most of our growth... my answer is likely to be an accelerating trend as we progress through '26.

    Q&A highlights

    6

    Clarification on the $73 billion AI backlog over 18 months and how XPU content/share will evolve given customer desire for more self-sufficiency.

    Confirmed the $73 billion backlog for 18 months, with expectations for more bookings. Dismissed the idea of 'customer-owned tooling' as an overblown hypothesis, emphasizing the multi-year strategic nature of custom AI accelerators and the continuous evolution of silicon technology.

    “don't follow what you hear out there as gospel. It's a trajectory. It's a multiyear journey.”

    asked by Unknown Analyst · answered by Hock Tan

    2 min read6 chapters

    Detailed Narrative

    01

    AI Semiconductor Momentum

    Broadcom's AI semiconductor business continues its rapid expansion, with FY25 revenue growing 65% to $20 billion and Q4 FY25 AI revenue up 74% to $6.5 billion. The company secured an additional $11 billion order from an existing customer and a $1 billion order from a new, fifth XPU customer for delivery in late 2026, highlighting strong demand for custom accelerators. The current order backlog for AI switches alone exceeds $10 billion, driven by the latest 102-terabit per second Tomahawk 6 switch.

    02

    Infrastructure Software Strength

    The Infrastructure Software segment demonstrated robust performance, with Q4 FY25 revenue up 19% YoY to $6.9 billion, exceeding the company's outlook of $6.7 billion. Strong bookings, with total contract value exceeding $10.4 billion in Q4 versus $8.2 billion a year ago, contributed to a significant increase in Infrastructure Software backlog to $73 billion, up from $49 billion a year ago.

    03

    Strategic Backlog and Supply Chain

    Broadcom's total order on hand for AI components (XPUs, switches, DSPs, optical components) now exceeds $73 billion, expected to be delivered over the next 18 months. This backlog is dynamic and expected to grow further. The company is actively addressing critical supply chain challenges🌐, including building a substantial advanced packaging facility in Singapore to partially in-source these operations, ensuring supply chain security and delivery for multi-chip custom accelerators.

    04

    Gross and Operating Margin Dynamics

    While the increasing mix of AI revenue, particularly from system sales and HBM pass-throughs, is expected to dilute gross margins (Q1 FY26 guidance down 100 bps sequentially), management anticipates significant operating leverage from operating expenses. This leverage is projected to drive operating margin dollars higher, even if the percentage margin declines slightly, maintaining overall profitability growth.

    05

    Capital Allocation and Shareholder Returns

    Broadcom returned $17.5 billion to shareholders in FY25, comprising $11.1 billion in dividends and $6.4 billion in share repurchases. The company announced a 10% increase in its quarterly dividend to $0.65 per share for Q1 FY26, marking the 15th consecutive annual increase. Additionally, the share repurchase program was extended, with $7.5 billion remaining through the end of calendar year 2026.

    06

    Non-AI Semiconductor Stability

    Non-AI semiconductor revenue in Q4 FY25 was up 2% YoY and 16% sequentially, primarily due to wireless seasonality and a solid recovery in broadband. Other end markets, however, showed limited signs of recovery in enterprise spending. Despite this, management noted no further deterioration in demand and expects non-AI semiconductor revenue to remain stable in FY26, with Q1 FY26 forecast at approximately $4.1 billion.

    AI-generated summary of the company’s earnings call. Not investment advice.