Broadcom AVGO
What does Broadcom do?
Broadcom develops and supplies semiconductor solutions and infrastructure software. The business is divided into two segments: Semiconductor Solutions and Infrastructure Software. The semiconductor segment includes network chips such as Ethernet switching and routing, custom chips (custom silicon), optical components, wireless and connectivity solutions for mobile devices, storage and server connectivity, as well as broadband and industrial products.
In the software segment, the company offers solutions for enterprise infrastructure, virtualization, security and mainframe operations, which are often sold to large customers through recurring license and subscription models. Competitively, Broadcom holds a leading position in networking and connectivity chips and in custom accelerators for data centers. The combination of a cyclical semiconductor business with more predictable software revenue, along with an acquisition-driven growth strategy, shapes the group's profile.
Score profile
Rank vs. Semiconductors (40 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Broadcom ranks among the best in the group Semiconductors (9.1/10). On growth, the company ranks among the best in the group Semiconductors (8.7/10). On valuation (higher = cheaper), the stock ranks in the middle in the group Semiconductors (4.8/10). On financial strength, Broadcom ranks below average in the group Semiconductors (4.0/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 17.1x | 18.7x | better than 54 % |
| Trailing P/E | 42.4x | 42.4x | better than 50 % |
| PEG ratio | 0.3x | 0.8x | better than 86 % |
| EV/EBITDA | 29.9x | 21.3x | better than 35 % |
| Price/sales | 17.8x | 5.8x | better than 16 % |
| Price/book | 15.9x | 5.1x | better than 12 % |
| Revenue growth | 85.5% | 25.5% | better than 89 % |
| Earnings growth | 215.3% | 7.4% | better than 86 % |
| Gross margin | 75.5% | 53.3% | better than 89 % |
| Operating margin | 54.3% | 15.5% | better than 91 % |
| Net margin | 42.9% | 10.3% | better than 91 % |
| Return on equity | 44.3% | 8.6% | better than 91 % |
| Debt/equity | 59.6% | 36.5% | better than 29 % |
| Current ratio | 2.5x | 3.3x | better than 38 % |
| Free cash flow yield | 1.9% | 1.3% | better than 55 % |
| Dividend yield | 0.8% | 1.2% | – |
| Payout ratio | 32.4% | 38.0% | – |
| Beta | 1.51 | 1.92 | – |
Valuation: what is Broadcom worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Broadcom a model range of 158.58 USD to 364.21 USD per share.
47 analysts, average rating “Strong buy”, average price target 533.42 USD (+60.7%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand from data center operators for networking and custom AI chips significantly influences the semiconductor segment.
- Recurring software license revenue from large enterprise customers provides more stable revenue and high margins.
- Acquired businesses and their integration, including cost discipline, substantially determine the group's earnings power.
Risks
- A few large customers account for a considerable share of revenue, so the loss or shift of orders would have a strong effect.
- The semiconductor business is cyclical and depends on customers' investment budgets as well as demand in the smartphone market.
- High debt from acquisitions and regulatory scrutiny of larger purchases could limit financial flexibility.
What to look for with Broadcom
Free cash flow relative to revenue shows how much liquidity the company generates after investment and, given its debt, is central to debt service and shareholder distributions.