Broadcom's (AVGO 3.05%) stock ripped higher last Friday, after the company posted fresh quarterly numbers and upbeat guidance. The company, which designs semiconductors for networking and custom AI accelerators and also sells infrastructure software via VMware, is crushing it. The market loved what it saw: Accelerating artificial intelligence (AI) revenue, record free cash flow, and upbeat guidance.
It's fair to ask the obvious question: Is Broadcom the next Nvidia (NVDA 0.77%)? Nvidia is the AI infrastructure leader, growing faster and generating far more profit. Is this Broadcom's future? Yes, Broadcom is benefiting from AI spending, but the two businesses are very different, and today's price already embeds a lot of optimism.
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Strong quarter, real cash, and accelerating AI
Broadcom posted revenue of $15.95 billion in the third quarter, up 22% year over year, with adjusted EBITDA of $10.7 billion (67% of revenue) and substantial free cash flow of about $7 billion. Management highlighted "continued strength in custom AI accelerators, networking and VMware," and said that AI revenue rose 63% to $5.2 billion. The company is guiding to $17.4 billion in revenue next quarter and expects AI semiconductor revenue to accelerate to $6.2 billion. Those are decisive, business-moving numbers, and they explain the stock's pop.
To keep the comparison grounded, look at Nvidia's scale and pace. In the second quarter ended July 27, 2025, Nvidia reported revenue of $46.7 billion, up 56% year over year, with Data Center revenue of $41.1 billion, also up 56%. Non-GAAP gross margin was 72.7%, and management guided next quarter's revenue to $54 billion at the midpoint. That's not a small edge; it's a different weight class entirely.
This doesn't diminish Broadcom's progress. Its semiconductor solutions revenue grew 26%, while infrastructure software rose 17%, showing momentum in both engines. Broadcom's third-quarter free cash flow of $7 billion -- about 44% of revenue -- underscores a disciplined operating model and the benefit of VMware's recurring software economics alongside AI hardware demand. The combination of custom accelerators, Ethernet switching, and VMware Cloud Foundation provides Broadcom with multiple avenues to capitalize on enterprise AI adoption.
Why "the next Nvidia" is the wrong framework
Broadcom and Nvidia win in different ways. Nvidia sells a full-stack AI computing platform and remains the default choice for frontier model training, with a product cadence that keeps pushing performance higher. Broadcom, in contrast, is a supplier -- a valuable one -- of custom accelerators and networking to hyperscalers, plus a software owner-operator via VMware. Those are attractive positions, but they typically command different growth arcs and valuation ceilings than a category-defining platform leader.
There's also the reality of expectations. After the post-earnings surge, investors are already paying up for Broadcom's AI ramp and VMware synergies. Sure, guidance implies another double-digit revenue increase next quarter, with AI semi sales rising again. That can keep the story working, but "life-changing" outcomes usually require either many years of outsized compounding from a much smaller base, or a step-change in unit economics that the market hasn't priced in.
Yes, Broadcom is a cash cow that should provide shareholders with good returns over the long haul. But it's not going to disrupt industries and sell the de facto chip in the most important growth vector in tech. The bar is high from here.
Furthermore, there are some considerable risks. A handful of large customers drive Broadcom's AI wins, which concentrates risk if deployment schedules shift. Additionally, hardware demand is cyclical, and networking buildouts can pause even in strong secular stories. On the software side, VMware integration is progressing, but it must translate into durable growth and cash conversion across multiple years.
The good news: Broadcom has a line of sight to continued AI accelerator and networking demand into the fourth quarter, and its cash-return posture remains intact with an ongoing dividend. The likely outcome is solid compounding -- not Nvidia's rocket ride -- from a strong, cash-generative base.
