Does Broadcom's Expanding Portfolio Make the AVGO Stock a Buy?

Broadcom AVGO shares have surged 37.2% in the past month. The company is benefiting from an expanding portfolio, rich partner base, solid VMware business, strong balance sheet and impressive free cash flow. Broadcom has outperformed its closest semiconductor peers, including NVIDIA NVDA, Advanced Micro Devices AMD and Marvell Technology MRVL, shares of which have returned 35.6%, 32.6% and 21%, respectively, over the same time frame.

AVGO Stock’s Performance

Broadcom’s strategy of updating its portfolio on a frequent basis has been a key catalyst. The company is expanding its portfolio with the launch of its third-generation 200G per lane (200G/lane) Co-Packaged Optics product line. In April, Broadcom introduced Incident Prediction, which extends the security feature of Adaptive Protection, a unique capability of Symantec Endpoint Security Complete (SES-C) This follows March showcase of 200G/lane DSP and SerDes, 400G optics, and PCIe Gen6 over optics products at the 2025 Optical Fiber Communications Conference and Exhibition (OFC). 

Strong demand for Broadcom’s application-specific integrated chips (ASICs), designed to support AI and machine learning and make these tasks more efficient, aids top-line growth. Alphabet and Meta Platforms are notable users of Broadcom’s ASICs. Custom AI accelerators (XPUs), which are a type of ASIC, are necessary to train Generative Artificial Intelligence (GenAI) models, and they require complex integration of compute, memory, and I/O capabilities to achieve the necessary performance at lower power consumption and cost. 

At OFC, Broadcom showcased the industry’s first 6.4-Tbps optics attach for XPU that enables high bandwidth, long-reach scale-up fabric connectivity for AI servers. AVGO’s next-generation 3-nanometer XPUs are the first of their kind to market in that process node. Broadcom is on track for volume shipment to hyperscale customers in the second half of fiscal 2025. AVGO is now planning to develop the industry’s first 2-nanometer AI XPU packaging 3.5D and targets scaling clusters of 500,000 accelerators for hyperscale customers.

Do these initiatives make Broadcom stock a buy? Let’s find out.

Solid Portfolio, Rich Partner Base to Boost AVGO’s Prospects

AVGO sees massive opportunities in the AI space as its three hyperscaler customers have started to develop their own XPUs. It believes that by 2027, each of AVGO’s three hyperscalers plans to deploy 1 million XPU clusters across a single fabric. Serviceable Addressable Market for XPUs and networks is expected to be between $60 billion and $90 billion in fiscal 2027 alone. The company has expanded its clientele with the addition of four new hyperscalers (although AVGO considers them as partners currently).

Broadcom’s focus on delivering AI-powered, proactive security to stay ahead of evolving cyber threats has been noteworthy. In March 2025, AVGO introduced updates to VMware vDefend, improving security planning, lifecycle management, and scalability for VMware Cloud Foundation with new tools like the Security Segmentation Assessment and Report, optimized micro-segmentation, and advanced Network Detection and Response, all aimed at improving threat prevention and operational efficiency.

AVGO introduced Incident Prediction, which extends the security feature of Adaptive Protection, a unique capability of Symantec Endpoint Security Complete (SES-C). SES-C is an integrated endpoint security platform that delivers cloud-based protection with AI-guided security management, all on a single agent/console architecture.

Broadcom’s rich partner base, including NVIDIA, Arista Networks, Alphabet, Dell Technologies (DELL), Meta Platform, Juniper and Supermicro, has been a key catalyst. These factors are expected to drive strong AI revenues. AVGO expects second-quarter fiscal 2025 AI revenues to jump 44% year over year to $4.4 billion. Semiconductor revenues are expected to surge 17% year over year to $14.9 billion.

Strong Liquidity Aids AVGO to be Shareholder Friendly

Broadcom benefits from a strong balance sheet and its free cash-flow-generating ability. As of Feb. 2, 2025, cash and cash equivalents were $9.31 billion, and Broadcom generated $6.11 billion in cash flow from operations. Free cash flow was $6.01 billion and accounted for 40% of revenue at the end of the first quarter of fiscal 2025.

The strong balance sheet is helping AVGO pay consistent dividends and return cash to shareholders through buybacks. Early this month, Broadcom announced that its board has authorized a new share repurchase program to repurchase up to $10 billion of its common stock through Dec. 31, 2025.

AVGO’s Earnings Estimate Revision Shows Upward Trend

The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $6.60 per share, up 4 cents over the past 60 days, indicating 35.52% year-over-year growth.
 

Broadcom Inc. Price and Consensus

Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote

The consensus estimate for fiscal second-quarter earnings is pegged at $1.57 per share, up a penny over the past 60 days, indicating 42.73% year-over-year growth.

AVGO Shares Trading at a Premium

AVGO stock is trading at a premium, as suggested by the Value Score of D.

In terms of the forward 12-month Price/Sales, AVGO is trading at 16.05X, higher than the sector’s 6.14X, NVIDIA’s 15.79X, AMD’s 5.44X and Marvell Technology’s 6.08X.

Price/Sales Ratio (F12M)

Conclusion

Broadcom’s expanding AI portfolio, along with a rich partner base, reflects solid top-line growth potential. These factors justify the premium valuation.

Broadcom currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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