TenQ

The Broadcom story

Broadcom designs custom AI and networking chips and owns VMware's infrastructure software, with the central question whether customers' AI buildouts can sustain rapid growth without weakening cash generation.

Written from Broadcom's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $349.57share price, last close
  • $1.67Tmarket value
  • 21/36TenQ Score checks passed
  • 21.4%growth a year the price assumes

The story in brief

  • AI drives expansion. AI semiconductor revenue reached $16.7 billion in the quarter to August 2026, growing 221% from a year earlier and 54% from the preceding quarter.
  • Cash generation is substantial. Broadcom generated $13.7 billion of free cash flow in the quarter to August 2026, representing 46% of revenue, and paid $3.1 billion in dividends.
  • Expectations exceed the record. The reverse DCF implies 21.4% annual growth in free cash flow after stock pay for ten years, above Broadcom's historical pace and the TenQ check's bar.

What drives the business

  • Broadcom builds custom chips through long customer collaborations, including a Long Term Agreement to develop Google's future Tensor Processing Units and a Supply Assurance Agreement covering networking and other components for Google's AI racks through up to 2031.
  • Apple expanded its collaboration with Broadcom through 2031 under agreements to develop and supply custom ASIC silicon for multiple generations of Apple products.
  • The VMware acquisition expanded Broadcom's infrastructure software business, whose VMware Cloud Foundation integrates computing, networking, storage, management and security for enterprise environments.
  • In the quarter to August 2026, semiconductor solutions revenue reached $20,839 million, up 127% from a year earlier, driven by custom AI accelerators and networking products.
  • Infrastructure software revenue was $8,752 million in the quarter to August 2026, up 29% from a year earlier, giving Broadcom a substantial business alongside its semiconductor operations.

What the price assumes

At $349.57 per share, the reverse DCF implies that free cash flow after stock pay grows 21.4% a year for ten years, using a 10.2% discount rate.

Broadcom delivered 19.9% annual growth on that measure over the last 7 years, while the TenQ check sets a 12.0% bar by slowing that record halfway toward 4%.

The implied growth requirement exceeds both comparisons, and Broadcom passes 0 of 6 Value checks despite passing 6 of 6 checks in Growth and Quality.

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What could change the story

  • Broadcom's top five end customers accounted for approximately 40% of revenue in each of fiscal 2025 and fiscal 2024, making changes in a small group of customers' spending important to results.
  • An AI spending correction, delayed infrastructure plans, canceled orders or customer financing constraints could interrupt demand for its accelerators and networking products.
  • Alternative financing arrangements such as the AI XPV platform add counterparty credit risk and operational complexity, with potential pressure on gross margins and cash flows if customers cannot pay or underlying assets lose value.
  • Stock pay was $8.5 billion over the last twelve months, and shares outstanding rose 14.7% over 3 years, so business growth does not flow through unchanged to each share.
  • The free cash flow yield of 2.4% is below its historical comparison of 7.5%, reinforcing the importance of sustained cash growth to the price's assumptions.

What to watch next

  • For the quarter to November 2026, Broadcom expects approximately $34.8 billion in revenue, up 93% from a year earlier, with non-GAAP operating income of approximately 66 percent of projected revenue.
  • Its AI semiconductor revenue outlook is $21.7 billion, up 236% from a year earlier, making accelerator and networking demand the clearest test of the projected acceleration.
  • Subsequent releases can show whether software growth continues alongside AI expansion and whether free cash flow conversion holds near the 46% reported in the quarter to August 2026 as customer financing arrangements develop.

Sources

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