Broadcom (AVGO) has been riding a wave of accelerating revenue growth in recent quarters, driving the stock up an incredible 127% over the past year. This upward trend in revenue growth, and the resulting jump in stock price, is reminiscent of Nvidia’s (NVDA) explosive performance in 2023. There, the revenue surge carried over into 2024, resulting in unprecedented profits. While it’s uncertain whether Broadcom can replicate NVIDIA’s dramatic trajectory, its strong underlying outlook gives me a bullish outlook on the stock.
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Recent revenue growth: record acceleration
What’s special about Broadcom’s revenue growth is that it has entered a phase of tremendous acceleration that exceeds historical trends. The company has historically experienced various stages of earnings acceleration and deceleration due to the highly cyclical nature of the semiconductor industry. However, Broadcom’s performance this time has been unparalleled, with revenue growth ranging from mid-single digits in 2023 to 34.2%, 43.0%, and 47.3% in the past four quarters (Q1-Q4 2024). , reached an astonishing 51.2%. , respectively.
One of the strong drivers behind this acceleration during this period is AI, which has proven to be a game changer for Broadcom. Apparently, the company’s custom AI accelerators (XPUs) and networking solutions are experiencing explosive demand. Therefore, in FY2024, AI revenue increased by 220% to reach $12.2 billion, accounting for 41% of semiconductor revenue. Second, demand growth was driven by hyperscalers deploying large AI clusters, increasing Broadcom’s reliance on cutting-edge technology.
Another notable catalyst was the acquisition of VMware. Broadcom acquired at the end of 2023 and achieved great results in 2024. Broadcom streamlined the software giant’s operations, enabling it to contribute more than $21 billion in revenue during the year. In particular, VMware Cloud Foundation, a full-stack software solution for private cloud environments, is rapidly gaining traction among enterprise clients. Finally, a broad recovery in semiconductors led to a recovery from previous cyclical lows, which also boosted results. Rising demand for enterprise networking and storage has combined with rapid growth in AI to strengthen Broadcom’s overall revenue potential.
Can Broadcom maintain its momentum?
Currently, it’s difficult to predict whether Broadcom’s revenue growth can maintain this impressive pace or achieve an “NVIDIA moment.” Much of NVIDIA’s rise rested on an unexpected explosion in AI-related demand, a phenomenon that was almost impossible to predict. However, this does not mean that the company cannot maintain good revenue and profit growth in the medium term.
Wall Street analysts remain optimistic, predicting that Broadcom’s revenue growth will stabilize in the mid-to-high teens over the next few years. Of course, these growth rates do not reflect NVIDIA’s triple-digit profits. Still, continued momentum in Broadcom’s product pipeline, particularly in AI, and in VMware and networking, provides a strong foundation for growth. Additionally, continued innovations such as the upcoming 3nm XPU should allow Broadcom to remain competitive in a high-demand market.
Valuation: Growth potential remains cheap
But even if Broadcom doesn’t have an “NVIDIA moment” in 2025, I believe its valuation will still be very attractive. The company is expected to deliver EPS of $6.34 in fiscal 2025, which would represent a 30.3% increase over last year. Analysts predict EPS growth of 20% in 2026 and 19% in 2027. This essentially means the stock is trading at a forward P/E of 25 times FY27 EPS.
Understandably, valuations based on projections several years into the future may seem speculative. However, Broadcom’s growth trajectory makes a compelling argument for its ability to grow beyond today’s price levels. Our advantages in high-growth areas such as AI accelerators and enterprise software allow us to maintain a profitable position even after a significant rally.
Is AVGO stock a buy?
Wall Street’s view of stocks is a bit more mixed after triple-digit gains in stocks over the past year. Notably, Broadcom maintains a “Strong Buy” consensus rating based on 23 Buy recommendations and 3 Hold recommendations assigned over the past three months. Despite this, AVGO’s average price forecast is $234.38, suggesting no upside potential.
See more AVGO analyst ratings
If you’re wondering which analysts to follow when buying or selling AVGO stock, Vivek Arya of Bank of America Securities (BAC) might be worth a look. Over the past year, he has been the most profitable analyst covering AVGO, with an average return per rating of 72.10% and a perfect 100% success rate.
final thoughts
Overall, AI demand, the VMware acquisition, and the broader semiconductor recovery will fuel Broadcom’s exceptional earnings and position the company to continue to deliver top and bottom line gains in fiscal 2025 and beyond. However, it is uncertain whether an “NVIDIA moment” will be achieved and is probably unlikely to occur.
Nevertheless, the company’s foothold in high-growth markets such as AI and enterprise software provides a solid foundation for sustained growth. In addition to the stock trading at a fairly convincing valuation, Broadcom stock remains a good bet for investors, even if the extended rally from 2024 suggests a lack of further gains from here. I believe it is an attractive opportunity.
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