Broadcom Remains a Free Cash Flow Cow

Image: Broadcom’s shares have done quite well since the beginning of 2023.

By Brian Nelson, CFA

Broadcom (AVGO) reported first-quarter fiscal 2025 results on March 6, where revenue and non-GAAP earnings per share topped the consensus estimates. Revenue leapt 25% for the first quarter from the prior-year period, while non-GAAP net income came in at $7.8 billion in the quarter. Adjusted EBITDA was 68% of revenue in the first quarter, coming in at $10.08 billion. Non-GAAP diluted earnings per share was $1.60 for the first quarter.

Management had the following to say about performance in the press release;

Broadcom’s record first quarter revenue and adjusted EBITDA were driven by both AI semiconductor solutions and infrastructure software. Q1 AI revenue grew 77% year-over-year to $4.1 billion and infrastructure software revenue grew 47% year-over-year to $6.7 billion. We expect continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers.

Consolidated revenue grew 25% year-over-year to a record $14.9 billion. Adjusted EBITDA increased 41% year-over-year to a record $10.1 billion. Free cash flow was $6.0 billion, up 28% year-over-year.

Broadcom’s cash from operations was $6.1 billion for the first quarter, less capital expenditures of $100 million, resulting in free cash flow of $6 billion, or 40% of revenue. Looking to the second quarter of fiscal 2025, management expects revenue of approximately $14.9 billion, above the $14.59 billion consensus estimate, and second quarter adjusted EBITDA to be 66% of projected revenue. Broadcom ended the quarter with $9.3 billion in cash and cash equivalents and short-and long-term debt of $66.6 billion. Though its balance sheet is saddled with outsize debt, it remains a free cash flow cow.

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