It is hard to argue with the recent results of Broadcom (NASDAQ:AVGO), which delivered a sparkling 3Q Fiscal 2025 earnings report late last week. The company enjoyed revenues of $15.95 billion – up 22% year-over-year – while its Adjusted EBITDA of $10.7 billion represented a 30% increase year-over-year.
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The company’s AI revenues of $5.2 billion increased at an even faster rate of 63% year-over-year, and Broadcom CEO Hock Tan predicted that this number would jump up to $6.2 billion in Q4. The maker of semiconductor and infrastructure software seems to be in the right place at the right time, as the current drive to load up on AI appears set to drive growth in the quarters to come.
The market responded in kind, and AVGO’s share price has increased some 10% in the days since the earnings call. Is Broadcom – which is up almost 140% during the trailing twelve months – about to go on a millionaire-making run?
While top investor Daniel Sparks is very happy riding this train, he also urges investors not to get too carried away.
“After the post-earnings jump, expectations are high. Expect more steady compounding than ‘life-changing’ upside from here,” predicts the 5-star investor, who is among the very top 1% of TipRanks’ stock pros.
Sparks further details that there is good reason for the market’s exuberance, as the company is “crushing it” with growing AI revenues, an upbeat guidance, and record-breaking free cash flow. Looking at the Q4 forward guidance of $17.4 billion in revenues (with $6.2 billion slated to come from AI), the investor calls these figures “decisive, business-moving numbers.”
However, those pining for Nvidia-like growth numbers are swinging at windmills. Sparks reminds investors that Nvidia inhabits a different playing field, with recent quarterly revenues of $46.7 billion. And that’s putting aside Nvidia’s unique technological contributions to the AI revolution.
“Broadcom is a cash cow that should provide shareholders with good returns over the long haul. But it’s not going to disrupt industries and sell the de facto chip in the most important growth vector in tech,” adds Sparks.
That does not diminish AVGO’s achievements, but it should put them a bit into perspective.
“The likely outcome is solid compounding — not Nvidia’s rocket ride — from a strong, cash-generative base,” concludes Sparks. (To watch Daniel Sparks’ track record, click here)
AVGO has plenty of fans on Wall Street as well. With 25 Buys and 2 Holds, AVGO coasts to a Strong Buy consensus rating. Its 12-month average price target of $375.58 has an upside of ~12%. (See AVGO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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