Broadcom Inc. reported fiscal fourth‑quarter 2025 results that surpassed expectations, with total revenue reaching $18.02 billion—up 28% year‑over‑year—and adjusted earnings per share of $1.95, beating the consensus estimate of $1.87 by $0.08 (a 4.3% beat). The strong top‑line growth was driven by a 74% year‑over‑year increase in AI semiconductor revenue, which rose to $6.5 billion, and a 19% rise in infrastructure software revenue, which reached $6.9 billion. These gains offset a modest decline in legacy semiconductor sales, keeping the company’s revenue trajectory on track.
The AI semiconductor segment, the company’s fastest‑growing business, contributed $6.5 billion in revenue, a 74% jump from $3.8 billion in Q4 2024. Infrastructure software, bolstered by VMware integration, grew 19% to $6.9 billion, reflecting strong demand for cloud‑native solutions from hyperscalers. Non‑AI semiconductor revenue fell 5% to $4.8 billion, illustrating the shift toward higher‑volume, lower‑margin AI hardware. Net income climbed to $8.52 billion, and free cash flow reached $7.5 billion, but the company’s gross margin slipped to 32% from 34% in the prior year, a clear sign of margin compression as the lower‑margin AI mix expands.
Management highlighted that the margin squeeze is a trade‑off for the high growth trajectory of AI products. CEO Hock Tan noted that AI semiconductor revenue is expected to double year‑over‑year in Q1 2026, while CFO Kirsten Spears emphasized that the company’s disciplined cost structure and strategic investments in high‑return verticals are mitigating the impact of the mix shift. The company’s dividend was increased 10% to $0.65 per share, its 15th consecutive raise, underscoring confidence in cash‑flow generation.
Guidance for fiscal 2026 reflects continued confidence: first‑quarter revenue is projected at $19.1 billion, above the $18.4 billion consensus, and adjusted EBITDA is expected to be 67% of revenue, a modest margin expansion despite the lower‑margin mix. The company also reiterated a robust AI backlog of $73 billion, indicating sustained demand from major hyperscalers and enterprise customers.
Investors reacted with caution, focusing on the margin compression that accompanies the rapid expansion of AI hardware. While the earnings beat and strong guidance signal confidence, the lower‑margin mix raises concerns about profitability sustainability. Broadcom’s dual‑moat strategy—high‑margin software and high‑growth AI hardware—remains intact, but the company must balance growth with margin preservation to maintain long‑term shareholder value.
Broadcom’s Q4 2025 results reinforce its position as a leading supplier to hyperscalers, but the margin dynamics highlight the challenges of scaling AI hardware. The company’s ability to manage cost discipline while expanding its AI portfolio will be critical to sustaining its growth trajectory and protecting profitability in the coming quarters.
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