Broadcom (AVGO) Q1 2025 Earnings Report

I’m Mike Machata, CFP®, and welcome to this special report for Vestergy AI, Wealth, and Economic Insights subscribers. Broadcom Inc. (NASDAQ: AVGO) released its first-quarter fiscal 2025 earnings on March 6, 2025, after market close, covering the period ended February 2, 2025. As a global leader in semiconductors and infrastructure software, the company reported a record $14.916 billion in revenue, up 25% year-over-year, and a non-GAAP earnings per share (EPS) of $1.60, exceeding analyst expectations. Adjusted EBITDA reached $10.083 billion, or 68% of revenue, reflecting strong profitability. During the earnings call, CEO Hock Tan disclosed negotiations with four hyperscalers for potential new partnerships—details not yet included in 2027 projections—which could significantly boost revenue and earnings if realized. This report provides a comprehensive analysis of AVGO’s financials, a detailed technical assessment, forward-looking valuations, and its position in the business cycle. I view $AVGO as a solid opportunity with potential to reach the high 200s to low 300s over two years, particularly if hyperscaler deals materialize, though I believe other growth and GARP stocks in my premium newsletters offer superior prospects. Let’s dive into the numbers.

Earnings Analysis: A Robust Quarter with Upside Potential

Broadcom’s Q1 fiscal 2025 results, detailed in the Form 8-K filed on March 6, 2025, highlight a strong performance:

• Revenue: $14.916 billion, up 25% from $11.961 billion in Q1 2024, beating guidance of $14.6 billion by $316 million (2.2% beat).

• Segment Performance: Semiconductor solutions contributed $8.212 billion (55%, +11% YoY), while infrastructure software delivered $6.704 billion (45%, +47% YoY), driven by VMware integration.

• AI Revenue: $4.1 billion, up 77% year-over-year, with Q2 guidance at $4.4 billion, reflecting robust demand for AI data center solutions.

• Non-GAAP EPS: $1.60, a 45% jump from $1.10 in Q1 2024, exceeding the consensus estimate of $1.51 (Nasdaq) by $0.09 (6% beat). Whisper numbers, typically 3-5% above consensus, may have ranged from $1.55-$1.57, implying a $0.03-$0.05 beat.

• Profitability Metrics: Adjusted EBITDA of $10.083 billion (68% margin, +41% YoY) and free cash flow of $6.013 billion (40% of revenue, +28% YoY) demonstrate financial resilience.

• Q2 Guidance: $14.9 billion in revenue (+19% YoY) and 66% adjusted EBITDA margins, indicating sustained growth despite non-AI semiconductor softness.

The hyperscaler development—four potential new clients—could add $5-10 billion to AI revenue by 2027, pushing total revenue toward $85-90 billion if deals close, a scenario not reflected in the $79.4 billion consensus forecast. The market reacted decisively: AVGO surged 17% in after-hours trading on March 6, peaking at $209.50 from $179.45, and closed at $194.96 on March 7 (up 8.64%), with volume of 73,232,167 shares—double the 35,991,526 average—signaling strong investor confidence.

Technical Analysis: A Clear Picture of AVGO’s Price Action

Let me walk you through the technical setup for AVGO as of the close on Friday, March 7, 2025, at $194.96, reflecting on the price action as we sit here on Sunday, March 9, 2025. I’ve been analyzing the stock’s one-day and one-year trends to give you a clear view of its momentum and key levels to watch.

First, let’s talk about support. Last week, AVGO filled a price gap from December 2024, where the stock had jumped from $175 to $180 without trading in between. That gap was closed around March 3-4, 2025, when the stock dipped to $179.45 before the earnings release. This fill, combined with the 200-day simple moving average sitting at $180 and the March 7 low of $181.56, creates a strong support zone between $179 and $182. What this means is that the stock has found a solid floor—if it pulls back, I expect buyers to step in around that range, providing a cushion against further declines.

On the upside, resistance levels are equally important. The stock faces a psychological barrier at $200, a round number that often challenges momentum. We saw AVGO hit $209.50 in after-hours trading on March 6 after the earnings release, showing it has the potential to break through $200. If it does, the next significant level to watch is $235, which was the high from February 2025. A sustained move above $200 could set the stage for a run toward $250-$300, especially if we get positive news on the hyperscaler front.

Now, let’s look at momentum indicators. The Relative Strength Index, or RSI, which I track over a 14-day period, was at 45.09 before the earnings release—a neutral level indicating the stock wasn’t overbought or oversold. After the 8.64% rally on March 7, I estimate the RSI climbed to between 65 and 68. This reflects strong bullish momentum, as the RSI moved above the 50 threshold, but it’s not yet in overbought territory, which starts above 70. This suggests there’s room for further gains before we need to worry about a potential pullback due to overextension.

Another key indicator I use is the Moving Average Convergence Divergence, or MACD, set to a 12, 26, 9 configuration. On March 7, the MACD line was at -0.82, just above the signal line at -0.86, with a positive histogram reading of 0.06. This confirms a bullish crossover, meaning the short-term momentum has overtaken the longer-term trend—a classic buy signal. This crossover, paired with the high trading volume of 73.2 million shares on March 7 (double the average of 35.99 million), validates the strength of this rally. However, if the histogram turns negative, it could signal a reversal, so I’ll be watching this closely.

Finally, the broader trend remains intact. AVGO has been in an uptrend since mid-2024, when it was trading in the $150s. The 50-day simple moving average, currently around $190, provides dynamic support below the current price, reinforcing the bullish structure. With the gap fill at $175-$180 last week and the earnings-driven rally pushing us to $194.96, I see a clear path for AVGO to target $250-$300 over the coming months, provided it breaks through $200 and sustains momentum.

Fundamental Analysis: Forward P/E and Growth Projections

Current Valuation

At $194.96 on March 7, 2025:

• 2025 EPS: Q1’s $1.60 annualized to $6.40, while consensus remains $5.38 (Nasdaq). Forward P/E is 30.5x ($194.96 / $6.40) or 36.2x ($194.96 / $5.38).

• 2026 EPS: 20-25% growth from $5.38 yields $6.46-$6.73, or $7.00-$7.50 with Q1 momentum, for a P/E of 27.8-28.8x.

• 2027 EPS: Baseline 13% growth from $6.73 ($7.61-$7.82), or $8.50-$9.00. Hyperscaler upside ($5-10 billion revenue) could push EPS to $10.00-$11.50 (20-25% growth), lowering P/E to 17-19.5x.

Revenue and Earnings Growth

• 2025: Consensus $61.1 billion (+18% from 2024’s $51.6 billion), but Q1/Q2 trends suggest $62-$63 billion (+20-22%).

• 2026: $70.3 billion (+15%, Nasdaq), potentially $75 billion (+23%) with hyperscalers.

• 2027: $79.4 billion (+13%, Nasdaq), but $85-90 billion (+17-20% CAGR) with hyperscaler deals adding $5-10 billion in AI revenue.

EPS Growth: Historical 29.5% (Simply Wall St), with Q1’s 45% jump supporting 30-35% for 2025. Hyperscaler success could elevate 2026-2027 growth to 40%, though 20-25% is a prudent base.

Valuation Assessment

• PEG Ratio: At 30% growth, 30x P/E is fair (PEG=1). Current 36.2x (consensus) suggests a premium, justifiable if growth exceeds 35%.

• Base Case (30x P/E): 2025: $6.40 × 30 = $192; 2026: $7.25 × 30 = $217; 2027: $9.00 × 30 = $270.

• Hyperscaler Case (35x P/E): 2025: $6.40 × 35 = $224; 2026: $8.50 × 35 = $297; 2027: $11.00 × 35 = $385 (or $402 with $11.50).

AVGO’s valuation reflects its AI leadership, with potential to justify higher multiples if hyperscalers drive growth.

Business Cycle Context

The semiconductor/AI sector is in a mid-to-late expansion phase:

• Indicators: Broadcom’s 25% revenue growth and hyperscaler capex (e.g., Meta’s $40 billion 2025 budget) signal peak demand. Non-AI growth of 11% (vs. 77% AI) suggests consumer sector cooling.

• Cycle Position: Post-2023 recovery, the peak may hit 2026-2027. Fed’s hinted 25 bps cut in Q2 2025 could extend growth, but tariff risks (e.g., China) threaten a downturn.

• Broadcom’s Position: Diversified revenue (55% semiconductors, 45% software) mitigates risks, with hyperscaler potential as a cycle extender.

Price Targets and Investment Outlook

• 1-Year Target (March 2026): $200-$230 (30-35x $6.40-$6.57 EPS), +3-18% from $194.96. Base: $215. Hyperscaler upside: $240-$260.

• 2-Year Target (March 2027): $250-$300 (30-35x $8.50-$8.57 EPS), +28-54%. Base: $275. Hyperscaler case: $350-$400 (35x $10.00-$11.50).

• Outlook: At $194.96, AVGO is a good buy, with potential to reach the high 200s to low 300s if hyperscaler deals add significant revenue. It outperforms the S&P 500’s 20x P/E, but better-priced growth and GARP stocks exist. Monitor $200 resistance and hyperscaler updates.

For 30 companies I consider superior opportunities, explore my premium 21st Century Innovators or TSP Navigator newsletters at www.vestergy.beehiiv.com.

Disclosure

Important Disclosures

Published by Vestergy LLC, this report is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell securities. The opinions expressed are mine, Mike Machata, CFP®, and are subject to change without notice. Semper Wealth Management LLC (a registered investment advisor) and Vestergy LLC are separate entities, and neither guarantees the accuracy or completeness of the content provided. I may hold positions in the securities mentioned, including AVGO, which could present a potential conflict of interest. Forward-looking statements, such as price targets and earnings projections, involve risks and uncertainties, and actual outcomes may differ materially. Investing carries risks, including the potential loss of principal, and you should consult a financial advisor before making any investment decisions. For additional details, visit www.semperwealthmanagement.com or www.vestergy.beehiiv.com.