Broadcom Q2 Earnings Beat Estimates, Revenues Up Y/Y, Shares Fall

Broadcom AVGO reported second-quarter fiscal 2025 non-GAAP earnings of $1.58 per share, surpassing the Zacks Consensus Estimate by 0.64% and increasing 43.6% year over year.

Net revenues increased 20% year over year to $15 billion, surpassing the Zacks Consensus Estimate by 0.37%. Broadcom’s revenue growth in the second quarter of fiscal 2025 was driven by strong performance in AI semiconductors and VMware momentum.

AI revenues benefited from continued investments from hyperscale partners in AI XPUs and connectivity solutions for AI data centers.

AVGO shares lost 4.01% in after-hours trading to $249.50 following the fiscal second-quarter results.

Broadcom Inc. Price, Consensus and EPS Surprise

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

AVGO’s Q2 Top-Line Details

Semiconductor solutions revenues (56% of net revenues) totaled $8.4 billion, rising 17% year over year and missing the Zacks Consensus Estimate by 0.17%. 

AI-related revenues grew 46% year over year to $4.4 billion, which was a major driver of overall revenue growth. This growth was driven by higher shipments of networking solutions to hyperscalers for AI applications.

Non-AI semiconductor revenues declined 5% year over year to $4 billion.

In the second quarter of fiscal 2025, broadband, enterprise networking and server storage revenues were up sequentially.

Industrial revenue was down in the second quarter of fiscal 2025, while wireless revenue also decreased due to seasonality.

Infrastructure software revenues (44% of net revenues) rose 25% year over year to $6.6 billion, bolstered by the successful conversion of enterprise customers to the full VMware Cloud Foundation
(VCF) software stack subscription.

AVGO’s Operating Details

The non-GAAP gross margin was 79%, expanding 320 basis points (bps) year over year.

Research and development, as a percentage of net revenues, decreased 210 bps year over year to 10.2%. Selling, general and administrative expenses also decreased 280 bps to 4%.

Adjusted EBITDA increased 35% year over year to $10 billion. The adjusted EBITDA margin expanded 720 bps on a year-over-year basis to 66.7%.

The non-GAAP operating margin grew 800 bps year over year to 65.3%.

AVGO’s Balance Sheet & Cash Flow

As of May 4, 2025, cash and cash equivalents were $9.47 billion compared with $9.31 billion as of Feb. 2, 2025.

Total debt (including the current portion of $5.53 billion) was $67.28 billion as of May 4, 2025, compared with $66.58 billion as of Feb. 2, 2025.

Broadcom generated $6.55 billion in cash flow from operations compared with $6.11 billion in the previous quarter. The free cash flow was $6.41 billion compared with $6.01 billion in the prior quarter.

As of March 31, 2025, the company paid out a cash dividend of $0.59 per share of common stock, totaling $2.78 billion.

AVGO Provides Optimistic Q3 Guidance

For third-quarter fiscal 2025, Broadcom expects revenues of $15.8 billion, suggesting an increase of 21% from the prior-year period’s actual.

AI semiconductor revenues are projected to grow 60% year over year to $5.1 billion, whereas non-AI semiconductor revenues are expected to reach $4 billion.

Infrastructure Software revenues are expected to grow 16% year over year to $6.7 billion.

Semiconductor revenues are anticipated to grow 25% year over year to $9.1 billion.

In the third quarter of fiscal 2025, enterprise networking and broadband are expected to continue to grow sequentially.

Server storage, wireless and industrial are expected to be largely flat.

Adjusted EBITDA is expected to be 66% of projected revenues.

The company anticipates the non-GAAP diluted share count to be 4.97 billion. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

AVGO’s Zacks Rank & Other Stocks to Consider

Currently, Broadcom carries a Zacks Rank #2 (Buy).

Amphenol APH, Juniper Networks JNPR and Upwork UPWK are some other top-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. APH, JNPR and UPWK sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

APH shares have gained 33.2% in the year-to-date period. The Zacks Consensus Estimate for APH’s full-year 2025 earnings is pegged at $2.66 per share, up by 1.5% over the past 30 days, suggesting growth of 40.74% from the year-ago quarter’s reported figure.

JNPR shares have lost 4.4% in the year-to-date period. The Zacks Consensus Estimate for JNPR’s full-year fiscal 2025 earnings has been revised upward to $2.08 in the past 30 days, suggesting year-over-year growth of 20.93%.

UPWK shares have lost 7.7% in the year-to-date period. The Zacks Consensus Estimate for UPWK’s full-year 2025 earnings is pegged at $1.14 per share, implying a rise of 9.62% from the year-ago quarter’s levels.

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

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