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Bullish

Broadcom

Reported December 11, 2025

30-second summary

30-second take. Broadcom closed FY2025 with Q4 revenue of $18.02B (+28% YoY), beating the $17.4B prior guide by $615M, with AI semiconductor revenue of $6.5B (+74% YoY) beating the $6.2B guide by ~$300M — and guided Q1 FY2026 to $19.1B (+28% YoY) with AI semis stepping to $8.2B (+100% YoY). The signal that matters: a fifth XPU customer was qualified via a $1B order, Anthropic placed an additional $11B follow-on order for late-2026 delivery on top of the $10B Q3 order, total AI backlog now sits at $73B for delivery over the next 18 months (split ~$53B XPUs / ~$20B networking, DSPs, optical and other components), and management is leading with specific doubling guidance rather than the conditional language Broadcom has typically used. Q1 gross margin guided down ~100bps QoQ on XPU mix — that's the cost of the volume ramp and was telegraphed.

Headline numbers

EPS

Q4 FY2025

$1.95

Revenue

Q4 FY2025

$18.02B

+28.0% YoY

Gross margin

Q4 FY2025

68.0%

Free cash flow

Q4 FY2025

$7.47B

Operating margin

Q4 FY2025

41.7%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$18.02B+28.0%$15.95B+12.9%
EPS$1.95—$1.69+15.4%
Gross margin68.0%—67.1%+88bps
Operating margin41.7%—36.9%+477bps
Free cash flow$7.47B—$7.02B+6.3%

Guidance

Guidance is issued one quarter forward. The Prior-guide column references the guide issued last quarter for the period just reported; the New-guide column is for next quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ4 FY2025$17.4 billion$18.015 billion+$0.615 billion above guideBeat
AI Semiconductor RevenueQ4 FY2025$6.2 billion$5.8 billion-$0.4 billion below guideBeat
Semiconductor RevenueQ4 FY2025$10.7 billion$11.072 billion+$0.372 billion above guideBeat
Infrastructure Software RevenueQ4 FY2025$6.7 billion$6.943 billion+$0.243 billion above guideBeat
Adjusted EBITDA MarginQ4 FY202567% of projected revenue67.8%+80 basis points above guideBeat
Gross MarginQ4 FY2025down approximately 70 basis points sequentially67.98%in-lineMet

New guidance

MetricPeriodGuideYoY
RevenueQ1 FY2026$19.1 billion+28% YoY
Revenue YoY GrowthQ1 FY202628%—
AI Semiconductor RevenueQ1 FY2026$8.2 billion+100% YoY
Non-AI Semiconductor RevenueQ1 FY2026approximately $4.1 billionflat YoY
Infrastructure Software RevenueQ1 FY2026approximately $6.8 billion—
Adjusted EBITDA MarginQ1 FY202667% of projected revenue—

Segment performance

Q4 FY2025
SegmentQ4 FY2025YoY
Semiconductor solutions$11.072B+35.0%
Infrastructure software$6.943B+19.0%
AI semiconductor revenue$5.8 billion (estimated from 74% YoY growth)—
Q1 FY2026 AI semiconductor revenue guidance$8.2 billion (expected 100% YoY growth)—

Profitability

Q4 FY2025
SegmentQ4 FY2025
Adjusted EBITDA margin67.8%
Free cash flow margin41.4%
Operating cash flow$7.703 billion
Capital expenditures$237 million

Management tone

Narrative arc: Q2 FY2025 inference pull-forward → Q3 FY2025 fourth customer qualification and CEO 2030 commitment → Q4 FY2025 fifth customer, $11B Anthropic follow-on, and $73B backlog quantification.

Three quarters ago Broadcom framed FY2026 AI growth as "sustaining" the ~60% FY2025 pace. Last quarter that became "improve significantly" with a fourth customer and $10B+ in secured orders. This quarter management put a specific doubling number on the table for Q1: "In Q1 fiscal 26, we expect our AI revenue to double year on year to $8.2 billion... AI revenue to continue to accelerate and drive most of our growth." In three quarters the FY2026 framing has moved from sustained to accelerating to doubling — and the doubling is anchored in a guide, not a forward-look qualifier. This is rare quantitative commitment from a management team that historically hedges.

The XPU customer disclosure arc tightened again, and the existing-customer expansion was just as material. Last quarter's news was the fourth qualified customer with a $10B Ironwood order; this quarter Broadcom disclosed both a fifth customer at $1B and an additional $11B follow-on from the same fourth customer (Anthropic): "in this quarter, Q4, we received an additional $11 billion order from the same customer for delivery in late 2026... we acquired a fifth XPU customer through a $1 billion order placed for delivery in late 2026." Each quarter the disclosure has grown more granular and more dollarized — Q2 had unnamed "prospects," Q3 had a converted prospect with a $10B order, Q4 has a named $11B follow-on and a new $1B fifth-customer order with delivery windows. The customer pipeline narrative now has a clear cadence: one new qualified customer per quarter, with existing customers materially expanding orders.

Backlog framing went from resistance to quantification — with composition. Last quarter management refused to break down the $110B consolidated backlog by segment. This quarter, under direct pressure, they disclosed "$73 billion in AI backlog to be delivered over the next 18 months," explicitly carved out from a $162B consolidated total, and in Q&A further broke that into roughly $53B XPUs and roughly $20B of everything else. The transparency upgrade signals confidence that the backlog is real and convertible — Broadcom would not have disclosed this if they thought it would invite skepticism.

The business model shift to systems sales is now explicit. Last quarter Tomahawk 6 was reframed as architectural; this quarter Charlie Kawwas confirmed in Q&A that Broadcom is selling complete systems, not chips: full racks including XPUs, switches, DSPs, and other components, with Broadcom owning system certification. The implication for gross margin is structural — system sales pass through more non-Broadcom content, which is why management explicitly walked the analyst community through "gross margin dollars will grow even as gross margin percentage compresses."

Non-AI tone hardened from "U-shaped recovery by mid-to-late FY26" to "stable." Last quarter management was cautious but directional; this quarter the language is flat: "non-AI semiconductor revenue to be stable... approximately $4.1 billion, flat from a year ago." Broadband still recovering, wireless flat, everything else weak. The recovery thesis has been quietly walked back to a stabilization thesis — though it barely matters given AI scale.

Recurring themes management leaned on this quarter:

AI semiconductor acceleration with 74% YoY growth and 65% full-year growthCustom accelerator XPU multi-customer monetization across Google, Apple, Cohere, SSI, and new fifth customerMassive AI backlog visibility ($73B over 18 months, representing 45% of total $162B backlog)AI networking demand exceeding accelerator demand with $10B+ switch backlogNon-AI semiconductor stabilization with enterprise spending remaining weakInfrastructure software achieving margin expansion post-VMware integration

Risks management surfaced:

Enterprise spending showing limited signs of recovery across non-AI end marketsWireless seasonality headwinds expected in Q1 (non-AI semiconductor decline sequentially)Customer-owned tooling and ASIC development potentially limiting future XPU content shareGlobal minimum tax and geographic income mix shift increasing tax rate from 14% to 16.5%Gross margin pressure from higher AI revenue mix (100 bps sequential decline forecasted)

Q&A highlights

Harlan Sir · JP Morgan

Verification that $73B backlog is a snapshot of current order book that will grow as customers place more orders over next 18 months. Inquiry into supply chain capacity for 3nm, 2nm wafer supply, co-op substrate, and HBM supply. Questions about advanced packaging mitigation efforts at Singapore facility.

Confirmed $73B is current backlog to ship over next 18 months with expectation of significant growth as more orders come in. Lead times range 6-12 months depending on product. Supply chain is an ongoing challenge being addressed. Singapore facility being built to insource advanced packaging for multi-chip custom accelerators for supply chain security and delivery. Silicon sourced from TSMC; no current constraints on 2nm/3nm capacity but monitoring as backlog builds.

$73 billion backlog for next 18 monthsLead times 6 months to 1 year depending on productSingapore facility for advanced packaging insourcingTSMC as primary silicon source for 2nm/3nm

Stacy Raskolm · Bernstein

Inquiry into gross margin trajectory as AI revenue ramps and system sales increase. Questions whether gross margins could fall to 60s range at corporate level and impact on operating margins over 4-6 quarters.

AI revenue has lower gross margin than rest of business but strong growth rate will provide operating leverage. Gross margin dollars will increase despite margin percentage deterioration. System sales will pass through more non-Broadcom components, further diluting gross margins. Operating margin dollars expected to remain at high growth levels despite margin percentage decline due to operating leverage on OpEx.

AI revenue has lower gross margin than non-AI businessGross margin percentage will deteriorate but gross margin dollars will growSystem sales will increase component pass-throughsOperating margin percentage will decline but dollars will grow

Blaine Curtis · Jefferies

Clarification on delivery model for original $10M deal follow-on and fifth customer order. Questions whether deliverables are individual XPUs or complete racks and product composition given Google's custom networking approach.

Confirmed shift to system sales model rather than chip-only sales. Will deliver complete systems with multiple Broadcom components beyond XPUs including networking and other elements. Responsible for entire system performance and certification. Compared to selling chips where Broadcom certifies final ability to run as part of system.

Transitioning to system sales modelSystem includes XPUs, switches, DSPs, and other AI data center componentsBroadcom responsible for entire system certification and performanceComparable to traditional chip sales with certification

Jim Schneider · Goldman Sachs

Request to calibrate AI revenue expectations for fiscal 2026 given 65% growth in FY25, 100% growth guidance for Q1 FY26, and whether Q1 represents sustainable growth rate. Clarification whether $1B fifth customer order is OpenAI.

Declined to provide specific FY26 guidance citing dynamic backlog. Backlog has ramped faster than prior 60-70% expectations. Currently guiding Q1 at 100% but not pinpointing FY26 due to moving target nature of backlog. Declining to confirm fifth customer identity beyond stating it is real customer on multi-year XPU journey.

Originally expected FY26 AI revenue growth of 60-70%Q1 FY26 growth doubled prior expectations$73 billion backlog continues to rampBacklog is dynamic moving target

Ben Reitzes · Mellius Research

Clarification on OpenAI 10-gigawatt contract timing and confidence in it being major revenue driver. Questions about obstacles and when it will contribute materially.

OpenAI 10-gigawatt agreement runs through 2027-2029, not 2026. Expect minimal contribution in 2026. OpenAI is multi-year journey customer developing own XPUs. Separate from the 10-gigawatt agreement is parallel XPU custom processor development program with OpenAI at advanced stage.

10-gigawatt OpenAI agreement: 2027-2029 timeframeMinimal 2026 contribution expectedOpenAI on multi-year XPU development journeySeparate XPU program at advanced stage

Answers to last quarter's watch list

Q4 FY2025 AI semiconductor revenue vs. the $6.2B guide (+66% YoY). AI semis came in at $6.5B (+74% YoY), beating both the $6.2B dollar guide and the implied 66% YoY pace. Management converted the "improve significantly" upgrade into a hard Q1 FY2026 doubling guide of $8.2B (+100% YoY), but explicitly refused full-year FY2026 quantification. The hard floor materialized for Q1, not FY2026.
Resolved positively
Q4 consolidated gross margin landing vs. the down ~70bps QoQ guide. Q4 non-GAAP gross margin landed at 77.9%, down 50bps QoQ — a slight beat versus the down-~70bps guide. Q1 FY2026 is now guided down a further ~100bps QoQ on continued XPU mix. The margin compression is happening at the pace management telegraphed, with Hock Tan reframing the narrative to gross margin dollars (which will grow) rather than percentage.
Resolved positively
Fourth XPU customer production ramp timing. No specific dollar contribution disclosed for the fourth customer in Q4, but Anthropic placed an additional $11B order in Q4 on top of the $10B Q3 order — a material expansion of the fourth-customer commitment for late-2026 delivery.
Resolved positively
Eighth XPU prospect status. The fifth customer was qualified this quarter via a $1B order, but no further commentary on the prospects beyond that. The conversion cadence (one new qualified customer per quarter) is intact; explicit pipeline beyond five is now opaque.
Continue monitoring
Non-AI semiconductor Q4 print vs. the $4.6B guide and FY2026 recovery slope. Non-AI semis came in at $4.6B in Q4 (+2% YoY, +16% QoQ on wireless seasonality), in-line with the guide. Q1 FY2026 is guided to ~$4.1B flat YoY — reframing what was a "U-shaped recovery" narrative into "stable" language. Enterprise spending remains weak. The cycle has not turned the way management implied last quarter.
Resolved negatively
Backlog composition disclosure. Management disclosed $73B AI backlog with 18-month delivery window out of $162B total consolidated backlog, and further broke it into ~$53B XPUs and ~$20B networking/components — the first time AI-only backlog has been quantified and decomposed. The transparency upgrade is material.
Resolved positively

What to watch into next quarter

Q1 FY2026 AI semiconductor revenue vs. the $8.2B guide (+100% YoY). A beat with explicit FY2026 dollar quantification or a YoY range would convert the Q1 doubling into a multi-quarter floor. An in-line print with continued FY2026 evasion would suggest management is comfortable letting the buy-side extrapolate.

Q1 FY2026 gross margin landing vs. the down ~100bps QoQ guide. Whether the slope steepens or holds at the guided pace sets the FY2026 margin model — particularly as system sales mix expands.

Sixth XPU customer qualification. The cadence has been one new qualified customer per quarter for two consecutive quarters. A third consecutive quarter of customer additions confirms the pipeline is structural; a quarter without one would suggest the pool of LLM frontier-model TAM is bounded at five-to-seven.

AI backlog growth from $73B. Management explicitly framed this as expected to grow with new orders. A material step-up (toward $90-100B) over the next 1-2 quarters would extend the multi-year AI revenue visibility; a flat or shrinking print would mean the backlog is converting to revenue without replacement.

Non-AI semiconductor Q1 print vs. the $4.1B flat-YoY guide and any recovery commentary. Enterprise spending weakness has now persisted for over a year; whether wireless and server storage join broadband in any sequential growth determines if there's ever a non-AI tailwind, or if Broadcom is structurally an AI-plus-software company.

OpenAI XPU program disclosure. The parallel XPU program with OpenAI is described as "advanced stage" but separate from the 10-GW agreement. Conversion to a named qualified customer would be the next concrete catalyst beyond the current five.

Sources

  1. Broadcom Q4 FY2025 press release (8-K exhibit, filed 2025-12-11): https://www.sec.gov/Archives/edgar/data/1730168/000173016825000116/avgo-11022025x8kxex99.htm
  2. Broadcom Q4 FY2025 earnings call prepared remarks and Q&A.

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