Here's our initial take on Broadcom's (NASDAQ: AVGO) fiscal 2025 second-quarter financial report.
Key Metrics
| Metric |
Q2 2024 |
Q2 2025 |
Change |
vs. Expectations |
| Revenue |
$12.49 billion |
$15 billion |
20% |
Beat |
| Earnings per share (adjusted) |
$1.10 |
$1.58 |
44% |
Beat |
| Cash and equivalents |
$9.81 billion |
$9.47 billion |
-3.5% |
n/a |
| Free cash flow |
$4.49 billion |
$6.41 billion |
44% |
n/a |
Solid Numbers and Strong Guidance
For its fiscal second quarter, Broadcom beat expectations (slightly) on both the top and bottom lines. Revenue for the semiconductor chip and software developer grew 20% year over year to just over $15 billion, and the company produced $4.97 billion of new income. On an adjusted basis, Broadcom generated $1.58 in earnings per share, a penny ahead of estimates.
Looking beyond the headlines, the numbers look solid. Broadcom produced $6.4 billion in free cash flow, a stellar 43% margin and an all-time high for the company. Management bought back $4.2 billion in stock. When it comes to guidance, that was a positive story as well. Broadcom is projecting $15.8 billion in revenue for the third fiscal quarter, slightly ahead of what analysts had been looking for.
Both of Broadcom's major business segments produced solid growth. Semiconductor solutions revenue grew 17% year over year, and infrastructure software revenue climbed by an impressive 25%. Plus, CEO Hock Tan said that management expects artificial intelligence (AI) semiconductor revenue growth to accelerate in the next quarter, which would be 10 consecutive quarters of growth in this part of the business.
Immediate Market Reaction
It might come as a bit of a surprise, but Broadcom stock's initial reaction to the earnings report was a negative one. As of 4:50 p.m. ET Thursday (about a half hour after the announcement), shares were lower by about 2%.
With a beat on the top and bottom lines and better-than-expected guidance, it might seem odd for the stock to fall. However, keep in mind that Broadcom was trading just below its all-time high going into this report and had climbed by a staggering 87% from its April low, so it's possible investors were simply expecting more of a positive surprise.
What to Watch
Broadcom's performance for the rest of 2025 will be largely dependent on AI spending. Management is reporting continued strong investment activity from its hyperscale partners, and as mentioned earlier, AI semiconductor revenue growth is expected to accelerate in the third fiscal quarter, so it will be worth keeping an eye on this to see how it actually plays out.
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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
