Why Broadcom's Q3 Earnings Were a Huge Win for AVGO Bulls

Key Points

• Broadcom revealed its latest earnings on Sept. 4, posting beats in revenue and earnings.
• Importantly, the company revealed a new customer acquisition from which it expects to generate billions in revenue.
• Overall, Broadcom showed strength in all the right places, validating the stock's bullish thesis.

One of the market’s most anticipated earnings reports was last week, coming from semiconductor giant Broadcom NASDAQ: AVGO.

Although the company’s financials beat expectations, this alone wasn’t enough for the stock to achieve big after-hours gains on Sept. 4. 

However, the company revealed huge news in its earnings call that led shares to trade up over 4% after-hours. General market magnified this positive reaction on Sept. 5.

Below, we’ll detail the company’s results and explain why they were highly bullish for investors.

Broadcom Exceeds Financial Expectations, But Initial Market Reaction Is Lukewarm

In its fiscal Q3 2025, Broadcom reported revenues of approximately $15.95 billion, or a growth rate of 22%, slightly beating consensus estimates for $15.82 billion in sales. The bottom line is that Broadcom’s adjusted earnings per share came in at $1.69, with a growth of over 36%. This beat Wall Street estimates by 3 cents, slightly exceeding the expected adjusted EPS growth rate of just under 34%. Broadcom expects revenues of approximately $17.4 billion in Q4, or 24% growth, notably surpassing analyst expectations for $17.01 billion, or 21% growth.

Initially, the market’s reaction to the company’s financials was neutral. In after-hours trading right after the release, shares fluctuated between slightly positive and slightly negative, which aligned with the insights in MarketBeat’s Q3 earnings preview on Broadcom. The company needed to post significant beats to allow shares to gain substantially after earnings based on financials alone. However, the market reaction shifted considerably once the earnings call began. Chief Executive Officer (CEO) Hock Tan made a bombshell announcement that would help shares blast off.

Broadcom’s XPU Prospects: 1 Down, 3 to Go

Over the recent past, Broadcom has had three hyperscale customers for its artificial intelligence (AI) application-specific integrated circuits (ASICs). The company also refers to these as XPUs. Broadcom has also been negotiating with four prospective hyperscale XPU customers. On the call, Tan was quick to provide new information on this front. He said that the company has officially converted one of those four prospects into an actual customer. He added that the company has now received over $10 billion in orders for AI server racks based on its XPUs from this customer.

That’s a significant development, as Broadcom is now showing it can attract more XPU customers. With its XPU customer count still at three as of Q3 2024, this suggests Broadcom is well on its way to converting the remaining prospects. This news helped drive shares up to around $318 in after-hours trading, setting a new all-time high at that point.

Broadcom’s AI semiconductor revenue growth also came in very strong in Q3 2025. Growth hit 63%, solidly surpassing Broadcom’s guidance of 60%. Additionally, the company expects AI semiconductor growth to accelerate to nearly 68% in Q4. Markets are most keenly focused on this part of Broadcom’s business. Thus, beating expectations in Q3, providing strong guidance for the next quarter, and adding a new XPU customer are all excellent signs.

The company also provided interesting color on its infrastructure software business. Broadcom said that “way over 90%” of its 10,000 largest VMware customers have now transitioned to VMware Cloud Foundation (VCF). Although not an exact figure, the number is clearly up substantially from 87% last quarter. This shows that Broadcom continues to execute strongly on its plan to drive value in VMware. The company also specifically said that its latest VCF update, known as VCF 9.0, “provides a real alternative to the public cloud." MarketBeat pointed out VCF 9.0’s ability to potentially take customers from the public cloud back in June. As Broadcom supports customers in deploying VCF, it sees opportunities to cross-sell advanced services. Taking on the public cloud and cross-selling are ways that VMware can continue to add upside to the overall business.

Broadcom Flexed Its Muscles in Q3, Outlook Remains Strong

Overall, Broadcom’s Q3 results and management commentary were highly impressive. The acceleration the company is now predicting in its AI semiconductor business should afford investors a significant level of confidence. Grabbing a new customer within its AI semiconductor business cements this.

Ultimately, Broadcom shares closed up by more than 9% on Sept. 5 in reaction to the firm’s release, more than doubling its after-hours gain on Sept. 4. This move further validates the extensive bullishness of Broadcom’s earnings commentary. In summary, Broadcom is firing on all its most important cylinders, and the stock’s bullish outlook remains fully intact.