Is Broadcom (AVGO) a Must-Buy Ahead of Its Q3 Earnings Amid Surging AI Demand?

The global AI revolution is reshaping technology markets, and few companies are positioned as advantageously as Broadcom (NASDAQ: AVGO). With its Q3 2025 earnings approaching, investors are scrutinizing whether the company’s sustained revenue momentum, margin resilience, and AI-driven tailwinds justify a bullish stance. A deep dive into Broadcom’s recent performance reveals a compelling case for its investment viability.

Sustained Revenue Momentum: A Dual-Engine Growth Story

Broadcom’s Q2 2025 results underscored its ability to capitalize on converging demand drivers. Total revenue surged to $15.004 billion, a 20% year-over-year increase, driven by robust contributions from its Semiconductor Solutions and Infrastructure Software segments [1]. The AI semiconductor segment, in particular, emerged as a standout, generating $4.4 billion in revenue—a 46% year-over-year leap [1]. This growth was not a one-off: AI semiconductors have delivered 10 consecutive quarters of expansion, with projections pointing to $5.1 billion in Q3 revenue [1].

The company’s Q3 actual results further validated this trajectory. Revenue hit $15.952 billion, a 22% year-over-year increase, with AI semiconductor revenue climbing to $5.2 billion—a 63% year-over-year jump [2]. Such consistency reflects Broadcom’s unique position at the intersection of AI hardware (Semiconductor Solutions) and software (Infrastructure Software), which together account for 100% of its revenue streams.

Margin Resilience: Profitability Amid Growth

Broadcom’s financial discipline has been a cornerstone of its success. Adjusted EBITDA in Q2 reached $10.001 billion, representing 67% of total revenue [1], while free cash flow hit a record $6.411 billion, up 44% year-over-year [1]. This margin strength was maintained in Q3, where free cash flow totaled $7.024 billion, or 44% of revenue [2]. The company’s ability to convert top-line growth into cash flow is further amplified by its shareholder-friendly policies, including $7 billion returned to shareholders via dividends and buybacks in Q2 alone [1].

AI-Driven Tailwinds: A Structural Shift

The AI semiconductor segment’s performance is emblematic of a structural shift in technology demand. Broadcom’s AI chips, critical for data centers and machine learning, now account for 29% of total revenue (Q2 2025) [1]. Within this segment, AI networking alone contributed 40% of AI revenue [2], highlighting the company’s diversified exposure to AI infrastructure.

Looking ahead, Broadcom’s guidance for Q3 2025 revenue of $15.8 billion—a 21% year-over-year increase [1]—and its Q4 projection of $17.4 billion (24% growth) [2] suggest that the AI tailwinds are far from peaking. Analysts note that the company’s roadmap for 2026 includes further expansion in AI semiconductors, which are expected to grow by 66% in Q3 2025 [3].

Inventory Efficiency: A Hidden Strength

While revenue growth is critical, operational efficiency cannot be overlooked. Broadcom’s inventory levels rose 6% quarter-over-quarter to $2 billion in Q2 2025 [2], but this was accompanied by improved inventory turnover, with days on hand increasing to 69 from 56 in the prior quarter [1]. This indicates better alignment between production and demand, reducing the risk of overstocking in a rapidly evolving market.

Conclusion: A Compelling Case for a Bullish Stance

Broadcom’s Q3 earnings are poised to deliver another strong performance, supported by its AI-driven growth, margin resilience, and operational efficiency. The company’s ability to scale its AI semiconductor business while maintaining profitability and cash flow generation sets it apart in a sector marked by volatility. For investors seeking exposure to the AI revolution, Broadcom’s track record and forward guidance present a rare combination of momentum and stability.

As the Q3 results approach, the key question is not whether Broadcom can sustain its growth—but how much further it can go.

**Source:[1] Broadcom Inc. Announces Second Quarter Fiscal Year 2025 Financial Results [https://www.stocktitan.net/news/AVGO/broadcom-inc-announces-second-quarter-fiscal-year-2025-financial-f1flp77npusj.html][2] Broadcom AVGO Q2 2025 Earnings Call Transcript [https://www.fool.com/earnings/call-transcripts/2025/06/05/broadcom-avgo-q2-2025-earnings-call-transcript/]