Is it worth buying Broadcom shares with a P/E above 91?

Despite trading at an expensive earnings multiple (P/E above 91), Broadcom is delivering such strong results that investors remain confident in its future and continue to buy the shares.

Broadcom Inc. (NASDAQ: AVGO) reported strong results for Q3 FY2025: revenue rose 22% year-on-year to 15.95 billion USD, while operating profit reached 10.5 billion USD, with a robust margin of around 66%. The main growth driver was the AI semiconductor business, where sales climbed to 5.2 billion USD (+63% year-on-year). Management also issued a positive outlook, guiding Q4 revenue of approximately 17.4 billion USD (+24% year-on-year). In infrastructure software, Broadcom continues to benefit from VMware integration synergies, supporting high contributions to both gross and EBITDA margins. However, the company remains heavily reliant on large hyperscale customers and a concentrated AI order base. Risks include ongoing interest expenses and refinancing needs, although strong free cash flow helps to mitigate the debt burden.

Investors reacted very positively to Broadcom’s report. AVGO shares surged by roughly 16% on the day of the release and continued to climb in the following sessions, reaching new all-time highs. The market welcomed the upgraded Q4 guidance and the announcement that the CEO’s compensation will now be tied to revenue growth in AI, underscoring management’s commitment to expanding aggressively in this segment. This all occurred against a broader backdrop of strong investor interest in AI-related companies, with Broadcom emerging as one of the leading names in this trend.

This article examines Broadcom Inc., breaking down its revenue sources, reviewing performance across Q1, Q2, and Q3 of FY2025, and outlining expectations for 2025. It also includes a technical analysis of AVGO shares, forming the basis for a Broadcom stock forecast for 2025.

About Broadcom Inc.

Broadcom Inc. is a US-based technology company specialising in developing chips for networking equipment, servers, data centres, wireless communications, and software for cloud and enterprise solutions. Founded in 1961 as a division of HP, it was spun off as Avago Technologies in 1991. In 2009, Avago Technologies went public on NASDAQ, and its shares have been traded under the ticker AVGO ever since. In 2016, Avago Technologies acquired Broadcom Corporation for 37.0 billion USD and adopted its name.

Broadcom Inc.’s main revenue streams

Broadcom’s revenue is divided into two main segments:

1. Semiconductor business – Approximately 75% of revenue is derived from the sale of chips for data centres, cloud computing, AI accelerators, network processors, and chips for servers, storage, networking equipment, and wireless modules for smartphones and Wi-Fi.

2. Infrastructure software – The remaining 25% of revenue comes from enterprise software for cloud computing, cybersecurity and networking solutions, VMware products, automation components, and DevOps platforms.

Broadcom Inc. Q1 FY2025 earnings report

On 6 March, Broadcom released its Q1 2025 financial results for the period ended 2 February 2025. The key figures are as follows:

• Revenue: 14.9 billion USD (+25%)
• Net profit: 7.8 billion USD (+67%)
• Earnings per share (EPS): 1.60 USD (+307%)
• Operating profit (non-GAAP): 9.82 billion USD (+44%)

Net revenue by segment:

• Semiconductor solutions: 8.2 billion USD (+55%)
• Infrastructure software: 6.7 billion USD (+47%)

Broadcom reported strong financial results for Q1 of FY2025, with revenue rising by 25% year-on-year. This growth was primarily driven by a 77% increase in AI-related revenue, which reached 4.1 billion USD, and a 47% rise in infrastructure software revenue, totalling 6.7 billion USD. The successful integration of VMware, acquired in 2023, also played a significant role in this expansion, strengthening Broadcom’s position in the enterprise software market.

CEO Hock Tan highlighted the strong demand for custom AI chips from cloud computing giants, which heavily invest in AI-driven data centres.

Looking ahead to Q2 2025, Broadcom expects revenue to reach 14.9 billion USD, slightly above analysts’ estimates. The company anticipates further growth in the AI semiconductor segment, with AI-related revenue projected to increase to 4.4 billion USD in the next quarter.

Broadcom Inc. Q2 2025 financial report

On 5 June, Broadcom published its earnings report for Q2 fiscal 2025, which ended on 4 May 2025. Below are its key figures:

• Revenue: 15.0 billion USD (+20%)
• Net income: 7.8 billion USD (+44%)
• Earnings per share (EPS): 1.58 USD (+43%)
• Operating profit (non-GAAP): 9.79 billion USD (+37%)

Net revenue by segment:

• Semiconductor solutions: 8.4 billion USD (+17%)
• Infrastructure software: 6.6 billion USD (+25%)

Broadcom’s Q2 FY 2025 report painted a strong picture for investors, highlighting the company’s solid position in the AI and semiconductor sectors. Revenue rose by 20% from last year, largely driven by a rapid 46% increase in AI revenue to 4.4 billion USD. This growth reinforced Broadcom’s pivotal role as a supplier of custom AI chips and networking solutions to major companies, such as Google, Meta, and ByteDance.

In Q2 fiscal 2025, the company repurchased shares worth 3.2 billion USD. This demonstrated management’s confidence in the long-term value of the business and its ability to generate stable cash flow.

Broadcom issued an optimistic outlook for Q3, anticipating revenue of 15.8 billion USD, slightly above Wall Street’s expectations. CEO Hock Tan emphasised that AI semiconductor revenue would increase to 5.1 billion USD next quarter, marking the tenth consecutive quarter of growth. This guidance reflected the company’s confidence in sustained demand for its AI and networking products, including the recently unveiled Tomahawk 6 switch, which enhances network performance and efficiency for AI workloads.

Despite strong financial results and a positive outlook, Broadcom’s shares fell by 5% following the release of the report. Market participants were concerned about a potential slowdown in the AI market, which could lead the company to miss its targets. In addition, Broadcom’s stock price had surged by 92% in the last two months, highlighting a high valuation that may be difficult to sustain amid trade restrictions. Nevertheless, analysts remained optimistic about the company’s future. For instance, Japanese investment banking and securities firm Mizuho Securities named Broadcom one of the best semiconductor stocks, citing its high profitability and strong free cash flow, supported by AI trends.

Overall, Broadcom’s Q2 2025 report confirmed its strategic leadership in the AI and semiconductor sector, with continued investment in AI technology, robust relationships with key clients, and a positive outlook, making the company’s shares an attractive investment.

Broadcom Inc. Q3 FY2025 financial report

On 4 September, Broadcom released its report for Q3 FY2025, which ended on 3 August 2025. The key figures are as follows:

• Revenue: 15.95 billion USD (+22% year-on-year)
• Net income: 8.40 billion USD (+37% year-on-year)
• Earnings per share (EPS): 1.69 USD (+36% year-on-year)
• Operating profit (non-GAAP): 145 billion USD (+31% year-on-year)

Net revenue by segment:

• Semiconductor solutions: 9.17 billion USD (+26% year-on-year)
• Infrastructure software: 6.79 billion USD (+17% year-on-year)

Broadcom’s Q3 FY2025 results exceeded analyst expectations and confirmed the company’s resilience amid intense competition and a rapidly growing AI sector. Revenue reached 15.95 billion USD, up 22% compared with the same period last year. The primary growth driver was AI-related solutions, where revenue grew 63% year-on-year to 5.2 billion USD.

The revenue mix remains split between two key areas: semiconductors and infrastructure software. Semiconductors account for more than 75% of revenue, with this quarter driven primarily by hyperscale data centre orders. Broadcom reported that its backlog of contracted orders reached 110 billion USD, half of which is linked to the AI segment. In software (including VMware), steady growth continues, supported by the transition to a subscription model and a focus on cloud-based solutions.

The company’s financial performance remains strong. Non-GAAP operating profit came in at approximately 10.7 billion USD, with an EBITDA margin of 67%. Adjusted EPS reached 1.69 USD (+36% year-on-year), beating consensus forecasts. Gross margin eased slightly due to the higher share of AI-related deliveries, but this was offset by strong operating efficiency.

Management issued a positive outlook for Q4 FY2025: revenue is expected at 17.4 billion USD, up 24% from a year earlier and ahead of analyst estimates. In AI, Broadcom expects to generate 6.2 billion USD, representing growth of 66% versus the same quarter in 2024. The company also confirmed a contract with a new hyperscale customer worth more than 10 billion USD for server solutions with AI accelerators (XPU), to be delivered over the coming years.

Fundamental analysis of Broadcom Inc.

Below is the fundamental analysis of AVGO based on the Q3 FY2025 results:

• Revenue and Profitability:
• Revenue: 15.95 billion USD, +22% year-on-year
• Operating profit: 15 billion USD, giving an operating margin of around 65.5%
• Adjusted EBITDA: 170 billion USD, or 67% of revenue

Conclusion – the high operating margin highlights outstanding operational efficiency, particularly for a technology company. Broadcom generates substantial operating income from every dollar of revenue.

• Cash Flow and Liquidity:
• Operating cash flow: 7.17 billion USD
• Free cash flow: 7.02 billion USD, up +47% year-on-year
• Capital expenditure remains extremely low (142 million USD), supporting strong cash generation
• Cash on balance sheet: 172 billion USD

Conclusion – Broadcom generates significant free cash flow, sufficient to cover capital expenditure, dividends, and debt service. This is a strong indicator of financial resilience.

• Debt Profile:
• Total debt: 66.26 billion USD
• Debt servicing: Fixed-rate debt totals 65.8 billion USD, with an average interest rate of 3.9% and an average maturity of 6.9 years. There is also a small portion of floating-rate debt (500 million USD)

Of the 7.02 billion USD in FCF, the company allocated 2.79 billion USD to dividends (0.59 USD per share, paid on 30 June) and 58 million USD to share repurchases for tax withholdings. Net debt reduction amounted to around 3.163 billion USD (bond issuance of 6.96 billion USD and repayments of 6.75 billion USD). The remaining cash flow of about 1.0–1.3 billion USD increased the cash balance and covered other items, consistent with the 1.25 billion USD rise in cash during the quarter.

Conclusion – the debt level is high, but servicing costs are very low (due to low rates) and supported by strong cash generation. A further advantage is the absence of risky short-term debt.

Overall conclusion of the fundamental analysis of AVGO: Broadcom is delivering excellent financial results. The business is expanding rapidly, profitability is high, and cash flow is strong and stable. The company has secured a strong position in AI and infrastructure software, making it resilient in the long term. However, the shares trade at a high valuation – the GAAP P/E exceeds 91. This means the market has already priced in confidence in continued growth, particularly in AI. If such growth continues, the current valuation may be justified. But if growth slows or competition intensifies, the shares could face a significant correction. At current levels, the margin of safety is limited, and investors should factor in the heightened level of risk.

Expert forecasts for Broadcom Inc. stock

• Barchart: 34 of 39 analysts rated Broadcom shares as Strong Buy, 2 as Buy, and 3 as Hold. The upper price target is 415 USD, with the lower bound at 225 USD
• MarketBeat: 31 of 32 analysts assigned a Buy rating, while 1 recommended Hold. The upper price target is 400 USD, and the lower bound is 210 USD
• TipRanks: 26 of 28 analysts rated the stock as Buy, while 2 recommended Hold. The upper price target is 419 USD, with the lowest at 300 USD
• Stock Analysis: 14 of 29 experts rated Broadcom shares as Strong Buy, 14 as Buy, and 1 as Hold. The top-end forecast is 400 USD, while the lower end is 210 USD

Broadcom Inc. stock price forecast for 2025

In July 2025, Broadcom shares broke through the upper boundary of the channel, after which AVGO continued to rise. The Q3 FY2025 report further strengthened market optimism, driving a sharp surge in the share price and creating a gap. Such dynamics are often viewed as the culmination of a rally, after which a correction typically begins. Based on the current performance of Broadcom shares, the two possible forecast scenarios for 2025 are as follows:

• Base forecast for Broadcom shares: this scenario assumes a corrective decline towards support at 282 USD, followed by a rebound signalling the end of the correction and a renewed upward move towards the historical high at 375 USD
• Alternative forecast for Broadcom stock: this scenario assumes continued euphoria in AVGO shares, leading to a breakout above resistance at 375 USD. In this case, the share price could climb to the maximum level projected by analysts, at 420 USD

Risks of investing in Broadcom Inc. stock

When investing in Broadcom’s stock, it is essential to consider the risks the company may face. Below are the key events that could negatively impact Broadcom’s revenue:

• A slowdown in artificial intelligence spending: as AI is a key growth driver, any reduction in spending due to market saturation, an economic downturn, or shifting priorities could directly affect semiconductor revenue. Although investor expectations for AI-related growth are high, slower-than-expected progress could undermine investor confidence and earnings forecasts
• Dependence on key clients: CEO Hock Tan has mentioned three major cloud clients developing their own AI chips. If these companies succeed, their reduced reliance on Broadcom could harm the profitability of its semiconductor segment
• Geopolitical and trade risks: Broadcom is exposed to risks from escalating trade tensions between the US and China. Potential tariffs under the Trump administration or export restrictions on AI chips to China could disrupt supply chains or limit access to traditional markets
• Competition in the semiconductor sector: Broadcom faces competitive pressures from companies like AMD and NVIDIA in the AI and networking solutions space. NVIDIA’s dominance in AI GPUs and the potential revival of Intel (with Broadcom reportedly interested in its chip business) could reduce Broadcom’s market share

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