Why Broadcom's Q3 Earnings Were a Huge Win for AVGO Bulls

Core Insights - Broadcom's Q3 2025 earnings report exceeded financial expectations, with revenues of approximately $15.95 billion, reflecting a growth rate of 22% and adjusted earnings per share of $1.69, a growth of over 36% [3][4][9] - The market initially reacted lukewarm to the earnings report, but a significant announcement during the earnings call led to a positive shift in stock performance, with shares trading up over 4% after-hours [4][10] - Broadcom secured a new customer for its AI application-specific integrated circuits (ASICs), referred to as XPUs, resulting in over $10 billion in orders for AI server racks from this customer [5][7] Financial Performance - Revenues for Q3 2025 were approximately $15.95 billion, slightly above the consensus estimate of $15.82 billion [3] - Adjusted earnings per share were reported at $1.69, beating Wall Street estimates by 3 cents and exceeding the expected growth rate of just under 34% [3][4] - Broadcom anticipates revenues of approximately $17.4 billion for Q4, indicating a growth rate of 24%, surpassing analyst expectations of $17.01 billion [3] Market Reaction - The initial market reaction to Broadcom's financials was neutral, with shares fluctuating slightly in after-hours trading [4] - Following the earnings call, shares closed up by more than 9% on September 5, validating the bullish sentiment surrounding the company's performance [10] AI Semiconductor Business - Broadcom's AI semiconductor revenue growth reached 63% in Q3 2025, exceeding the company's guidance of 60% [7] - The company expects AI semiconductor growth to accelerate to nearly 68% in Q4, indicating strong market interest in this segment [7] - The addition of a new XPU customer is seen as a significant development, suggesting potential for further customer conversions [6][9] Infrastructure Software Business - Over 90% of Broadcom's 10,000 largest VMware customers have transitioned to VMware Cloud Foundation (VCF), up from 87% in the previous quarter [8] - The latest VCF update, VCF 9.0, is positioned as a viable alternative to public cloud solutions, providing opportunities for cross-selling advanced services [8]