Broadcom AVGO shares have surged 13% since reporting Q3 fiscal 2025 results. Non-GAAP earnings beat estimates at $1.69 per share, up 28% year over year. Revenues hit $15.95 billion, up 22%. AVGO outperformed peers like AMD, CSCO, and MRVL YTD, benefiting from a strong portfolio and partner base.

Broadcom benefits from strong demand for XPUs for Generative AI models, with AI revenues up 63% YoY. The company’s rich partner base, including Alphabet and Meta Platforms, is driving growth. AVGO expects AI revenues to grow 66% YoY in Q4 fiscal 2025, with Semiconductor revenues projected at $10.7 billion.

AVGO’s strong liquidity with $10.72 billion in cash and $7.17 billion in cash flow from operations supports dividends and buybacks. Free cash flow accounted for 44% of revenue in Q3 fiscal 2025. However, a higher mix of lower-margin XPUs is expected to impact gross margins in the near term.

Despite strong growth potential, AVGO stock is trading at a premium, with a forward 12-month price/sales ratio of 22.01X. A Zacks Rank #3 suggests a hold for investors, waiting for a better entry point. AVGO’s expanding AI portfolio and partner base are reasons to hold, but declining margins and macroeconomic challenges are concerns.

Artificial intelligence and quantum computing convergence could bring significant investment opportunities. Discover the stocks leading this technological revolution with Zacks’ special report, offering insights on the quantum computing race and potential gains for early investors. Access the report for free now.

Read more at Nasdaq: Broadcom Rises 13% Post Q3 Earnings: Buy, Sell or Hold the Stock?