Broadcom FY25Q4 corresponds to the August/September/October 2025 period.
Broadcom FY25Q4 Earnings:
Revenue reached $18.02B, up 28% year over year and 13% sequentially, above the $17.47B consensus estimate.
GAAP gross margin 68%, up 3.9 percentage points year over year and 0.9 percentage points sequentially; operating margin 41.7%, up 8.8 percentage points year over year and 4.8 percentage points sequentially; non-GAAP operating margin 66.2%, up 3.5 percentage points year over year and 0.7 percentage points sequentially.
GAAP net income $8.52B, up 97% year over year and 106% sequentially, primarily driven by income tax effects; non-GAAP net income $9.71B, up 40% year over year; non-GAAP net margin 54% (previous quarter 53%).
No share repurchases for two consecutive quarters; $7.5B remaining authorization. Quarterly dividend $2.8B; FY26 dividend raised 10%. Gross principal debt $67.1B, weighted average coupon 4%, average maturity 7.2 years.
Segment FQ4:
Semiconductor revenue $11.1B, up 35% year over year, 61% of revenue. Semiconductor gross margin 68%, operating margin 59%, up 2.5 percentage points year over year. FQ1 semiconductor revenue guided to $12.3B, up 50% year over year.
Software revenue $6.9B, up 19% year over year, 39% of revenue. Software gross margin 93%, operating margin 78%. Total contract value (TCV) signed this quarter $10.4B, up $2.2B sequentially. Backlog $73B. FQ1 software revenue guided to $6.8B, up 1% year over year; management noted Q1 is a renewal low season. FY26 software revenue expected to maintain low-double-digit growth. (Note: VMware revenue scale no longer disclosed since FY25Q1.)
Semiconductor detail FQ4: (Note: since FY25Q1, segment revenue no longer disclosed; only semiconductor AI and non-AI disclosed.)
Semiconductor AI revenue $6.5B, up 74% year over year and 25% sequentially, slightly above prior guidance of $6.2B, representing 59% of semiconductor revenue. Custom XPU revenue exceeded $4.29B, doubling year over year. Customers are not only using XPUs for internal training and inference but also expanding externally: e.g., Google's TPUs power not only Gemini but also Apple, Cohere, and SSI for AI cloud. Broadcom's custom XPU exposure is concentrated in four large customers (Google, Meta, ByteDance, Anthropic). This quarter, the fourth customer Anthropic added an $11B order (TPUv7 rack), bringing cumulative orders to $21B, with delivery expected by end of 2026. Simultaneously announced a fifth customer (OpenAI) with an initial $1B order, delivery expected by end of 2026. The previously announced 10GW collaboration with OpenAI for 2027-2029 is a non-binding letter of intent. Both new customers ordered in rack form, not just XPUs. Management believes the "customer fully self-developed replacement" narrative is an overhyped assumption and unlikely to occur.
Beyond switches, record order demand was also seen in DSPs, optical components (e.g., lasers), and PCIe switches. Ethernet-based AI networking chip revenue was under $2.21B (NVIDIA's AI networking chip revenue this quarter was $8.19B, shipped primarily as full servers, while Broadcom ships chips). AI networking chip to custom AI chip revenue split is 35%/65%+; management expects the AI networking chip share to continue declining.
Semiconductor non-AI revenue $4.6B, up 2% year over year. Within non-AI, broadband is recovering, wireless is flat, but enterprise spending remains weak. Management previously indicated meaningful recovery may not begin until the second half of 2026.
Outlook:
FY26 Q1 revenue guided to $19.1B, up 28% year over year, with semiconductor revenue of $12.3B, up 50% year over year, including AI revenue of $8.2B, doubling year over year, and non-AI revenue of $4.1B, flat year over year. Software revenue $6.8B, up 1% year over year. Gross margin guided down 1 percentage point sequentially, primarily due to higher AI revenue mix, and rack-form orders will further pressure gross margin going forward. Adjusted EBITDA margin 67%, down 0.6 percentage points year over year.
Total backlog $162B (previous quarter $110B), of which AI semiconductor-related (XPU, switches, DSP, optical components, etc.) exceeds $73B: XPU ~$53B, AI networking ~$10B, other AI ~$10B. These orders are expected to be delivered within the next 18 months, with potential for further upside. Software backlog $73B.
Broadcom possesses 1.6T silicon photonics technology, but it is not yet time for large-scale deployment; management believes silicon photonics will not become mainstream in the near term.
The Singapore factory build-out is intended to bring advanced packaging in-house, not only for cost but also for supply chain security and delivery assurance. Wafer fabrication continues to rely on TSMC, with no obvious bottleneck currently seen.
Overall, Broadcom's earnings and guidance across the board exceeded expectations. However, the implied AI revenue guidance of $73B over the next six quarters was not sufficiently impressive, especially compared to NVIDIA's $500B revenue guidance, and combined with declining gross margin guidance and a valuation well above NVIDIA and other tech giants (forward PE Broadcom 37x vs NVIDIA 24x), the market's strong reaction is understandable.
Long term, given that cloud computing remains the highest-ROI scenario for AI monetization, the cloud AI capex pie is large enough, and enterprise AI and sovereign AI are just beginning, leaving substantial growth runway for all players.
Based on the $73B AI revenue guidance for the next six quarters released in this earnings report, FY26 revenue is estimated at $89B+. At a non-GAAP net margin of 53%, FY26 net income would be $47B+. Assuming FY27 AI revenue runs at a quarterly rate of $16B+ ($65B+ annualized), and non-AI semiconductor and software grow 10% year over year, FY27 total revenue would be ~$119B+. At a non-GAAP net margin of 50%, that implies net income of $60B+.