Broadcom(US:AVGO) The Motley Fool·2025-12-15 13:40Core Viewpoint - Broadcom is on the verge of joining the $2 trillion market capitalization club, alongside major tech companies, following impressive fiscal 2025 results [1][3]. Financial Performance - Full-year revenue increased by 24%, diluted earnings per share surged by 288%, and free cash flow rose by 39% [2]. - Compared to fiscal 2021, revenue in fiscal 2025 was up 133%, gross margins reached a five-year high of 78.6%, and adjusted EBITDA increased by 160% [14]. Market Position - Broadcom's stock price has increased over seven-fold in the last three years, making it the sixth-most valuable U.S. company [3]. - The company is outperforming all "Magnificent Seven" stocks in 2025 [3]. AI Growth Impact - AI has significantly transformed Broadcom's revenue mix, with 58% of revenue coming from semiconductor solutions in fiscal 2025 [7]. - AI semiconductor revenue grew by 74% year-over-year, with a forecast of $8.2 billion for the first quarter of fiscal 2026, double that of the first quarter of 2025 [8]. Revenue Forecast - For fiscal 2026, Broadcom's total revenue is projected at $19.1 billion, with AI semiconductor revenue expected to account for 42.9% of total revenue [9]. Competitive Advantage - Broadcom's custom AI chips are gaining traction among hyperscalers, leading to significant deals and revenue growth [12]. - Unlike Nvidia, Broadcom maintains a balanced business model, reducing dependency on AI alone [13]. Dividend and Profitability - Broadcom has increased its dividend for 16 consecutive years, with an average compound annual growth rate of 30% from fiscal 2016 to fiscal 2026 [15]. - Despite a low dividend yield of 0.6%, the company’s high profitability supports a stable and growing dividend [16]. Valuation Concerns - Broadcom's stock is considered expensive, trading at over 30 times projected earnings for fiscal 2027 [18]. - The stock may not provide outsized returns in the near term as it is priced at a premium [20][21].