QS Research · Michael Burry's Scion Capital analyst template · 2006
Broadcom Inc. (AVGO)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +10% · downside -29% · upside +31%
The verdict is watch: on section 13's TTM-to-Aug-2-2026 base, 33.4x EV/EBITDA (N25) on $43.45B EBITDA (N13) equals about $1,451B EV, or today's $1,414.88B market cap (N8) after about $37.10B net debt; a 10% EBITDA rise to $47.80B at 33.4x gives about $1,559B equity (+10.2%), Cisco's 24.1x gives about $1,010B (-28.6%), and 30% EBITDA growth at 33.4x gives about $1,849B (+30.7%). The operating story is real — Q3 FY2026 AI semis $16.7B, Q4 guide $21.7B, TTM FCF $39.40B — but the current multiple already capitalizes much of the AI ramp, and the customer/backstop concentration is a genuine risk. Deep-value upside requires either a lower multiple or faster EBITDA growth; today's risk/reward fails the long rule (base below +30%, downside worse than -25%) and is not a short. I am watching because a 40% de-rating plus 86% revenue growth could create a mispricing, but not yet at a margin of safety; all cases use the section 13 TTM EBITDA base, not a cycle average.
Key numbers
- Share price: $296.39
- Market cap: $1,414.88B
- Latest financial period: TTM to Aug 2, 2026
- Revenue (TTM): $89.10B
- EV / EBITDA (TTM): 33.4x
- P/E (TTM): 37.0x
The 15 boxes
- ✓ 1. Long-form business notes
Broadcom as reported in the FY2025 10-K is two businesses on one sales and administrative platform: semiconductor solutions sold into five end markets (with AI data centers now the lead story — custom XPUs, Ethernet switching/routing silicon, NICs, PHYs, optical components, racks and systems) and infrastructure software in five portfolios, the newest being VMware's private cloud. Reported scale went from $23.89B revenue / $4.01B operating income in FY2020 to $63.89B / $25.48B in FY2025, with operating cash flow of $27.54B against only $623.0M of capex (FY2025), because a majority of manufacturing is outsourced. The FY2024 figures need care: operating income fell to $13.46B on revenue of $51.57B, and FY2025 net income of $23.13B came in above pre-tax income of $22.73B, so net income is not a clean read on operating profitability.
- ✓ 2. Competitive advantage
The margins and cash flow say there is a real advantage: FY2025 revenue $63.89B produced $43.29B gross profit (~68%) and $25.48B operating income (~40%), with operating cash flow of $27.54B against capex of only $623.0M. The 10-K backs that with scale assets that are hard to copy — roughly 19,000 patents, ~33,000 employees (~57% in R&D) and ~4.1% voluntary attrition in FY2025 — but it never names a single competitor, and the return profile is lumpy (operating margin ~45% in FY2023, ~26% in FY2024, ~40% in FY2025). The main chips in the moat are concentration (~40% of FY2025 net revenue from the top five end customers, 48% through distributors) and a business the company itself calls 'highly cyclical'. Verdict: durable but not unassailable scale/IP advantage, priced off current earnings.
- ✓ 3. 10-Q takeaways
Fiscal quarter ended 2026-08-02 shows revenue of $29,591M, up 86% y/y as given, gross margin 69%, and operating income $15,955M (54% of revenue); three-quarter revenue was $71,089M, up 55%. Operating cash flow was $14,197M in the quarter and $32,950M for three quarters; cash was $23,975M at 2026-08-02. Working capital rose to $31,335M, with inventory $4,523M and receivables $13,707M to support AI shipments; three-quarter buybacks were $8,450M and dividends $9,281M. The main new risk disclosed is the AI XPV Backstop with maximum potential liability about $29B undiscounted; the excerpts give no formal financial guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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