Broadcom: Bullish Into Q4 2025 Earnings, But Margins Could Bite

Deep Value Investing9.88K FollowersFollow5ShareSavePlay(11min)CommentsSummaryThe OpenAI's 10 GW partnership is the biggest upside driver in my bull case on Broadcom Inc. In my view, this is the validation that XPUs can compete with GPUs.Using my model, if 10 GW costs $350B and AVGO captures 50% across networking plus custom ASICs, I estimate a $175B potential upside over 3.5 years.Q4 2025 guidance is $17.4B revenue (24% YOY) with AI semiconductor solutions at $6.2B (66% YOY), supported by recent customer traction ($10B AI order plus OpenAI's 10 GW deal).The key risk, in my view, is margin pressure. Q3 gross margin fell 100 bps sequentially, and Q4 guidance implies another 70 bps decline (likely due to higher HBM costs).Valuation is rich versus peers at 95x forward earnings. However, the growth story is solid, and that's what investors pay for during a broader bull run. I reiterate my strong buy. Sundry Photography/iStock Editorial via Getty Images In my last article on Broadcom Inc. (AVGO), I argued that there is more room for multiple expansion after the company reported impressive Q3 2025 results. Since then, the company signed a 10This article was written byDeep Value Investing9.88K FollowersFollowSmall deep value individual investor, with a modest private investment portfolio, split approx. 50%-50% between shares and call options. I have a B.Sc. in aeronautical engineering and over 6 years of experience as an engineering consultant in the aerospace sector. The latter statement is not relevant in any way whatsoever to my investment style, but I thought to add it for self-indulgent purposes. I have a contrarian investment style, highly risky, and often dealing with illiquid options. How illiquid? Well, you can land a Jumbo on the spread and still have clearance for take-off. From time to time, I buy shares, mostly to not be categorized as a degen by my fellow investor friends, therefore the 50%-50% allocation. My timeframe tends to be between 3-24 months.I like stocks that have experienced a recent sell-off due to non-recurrent events, particularly when insiders are buying shares at the new lower price. This is how I often screen through thousands of stocks, mainly in the US, although I may own shares in banana republics. I use fundamental analysis to check the health of companies that pass through my screening process, their leverage, and then compare their financial ratios with the sector, and industry median and average. I also do professional background checks of each insider who purchased shares after the recent sell-off. I use technical analysis to optimize the entry and exit points of my positions. I mainly use multicolor lines for support and resistance levels on weekly charts. From time to time I draw trend lines, taken for granted, in multicolor patterns. Note: I tried to keep my introduction as real, and authentic as possible. I dislike empty suits, high-level BS, deep-level BS, unnecessary jargon, and self-indulgent, third-person written introductions with an air of superiority.Thanks for reading my introduction!Analyst’s Disclosure:I/we have a beneficial long position in the shares of SOXL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Recommended For You