Broadcom (NASDAQ:AVGO) Delivers Impressive Q3, Inventory Levels Improve

Fabless chip and software maker Broadcom (NASDAQ:AVGO) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 28.2% year on year to $18.02 billion. On top of that, next quarter’s revenue guidance ($19.1 billion at the midpoint) was surprisingly good and 4.4% above what analysts were expecting. Its non-GAAP profit of $1.95 per share was 4.3% above analysts’ consensus estimates.

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"In Q4, record revenue of $18.0 billion grew 28% year-over-year, driven primarily by AI semiconductor revenue increasing 74% year-over-year," said Hock Tan, President and CEO of Broadcom Inc.

Company Overview

Originally the semiconductor division of Hewlett Packard, Broadcom (NASDAQ:AVGO) is a semiconductor conglomerate spanning wireless communications, networking, and data storage as well as infrastructure software focused on mainframes and cybersecurity.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Broadcom’s 21.7% annualized revenue growth over the last five years was exceptional. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers, a great starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Broadcom’s annualized revenue growth of 33.6% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Broadcom reported robust year-on-year revenue growth of 28.2%, and its $18.02 billion of revenue topped Wall Street estimates by 3%. Company management is currently guiding for a 28.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 37.4% over the next 12 months, an improvement versus the last two years. This projection is eye-popping for a company of its scale and suggests its newer products and services will spur better top-line performance.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Broadcom’s DIO came in at 36, which is 26 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.

Key Takeaways from Broadcom’s Q3 Results

We were impressed by Broadcom’s revenue beat and strong improvement in inventory levels. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 3.1% to $418.84 immediately after reporting.

Broadcom had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.