AVGO

Broadcom is operating from a position of rare strength. FY2025 revenue grew 23.9% to $63.9B with a 67.8% gross margin, 39.9% operating margin and 36.2% net margin, while ROE hit 28.4%. The cash engine is the standout: $27.5B of operating cash flow against just $623M of capex (an asset-light, fab-light model) throws off roughly $27B of free cash flow, which funded $11.1B of dividends and $2.45B of buybacks and still let the company deleverage — total liabilities fell 8.3% to $89.8B as equity rose 20.1%, taking liabilities/equity to a comfortable 1.10x. The MD&A frames the two-engine story clearly: a semiconductor segment riding 'anticipated or actual demand for AI-related products and solutions,' and an infrastructure-software segment where the VMware/VCF 'enterprise-wide license model' converts customers to high-margin subscriptions with portability across cloud and on-prem.

The problem is price, not quality. At $411.35 the stock trades at 86.2x trailing EPS of $4.77 and 30.5x sales for a $1.95T market cap — a multiple that already discounts years of flawless AI-led compounding, leaving essentially no margin of safety. The free-cash-flow yield on that valuation is only ~1.4%. Note too that the headline +292% net-income jump to $23.1B is flattered by a depressed FY2024 base ($5.89B), which was burdened by VMware merger and integration charges; the cleaner organic signal is the +23.9% revenue line, strong but not 4x. Extrapolating the EPS growth rate would be a mistake.