Broadcom (AVGO) reported record-breaking financial results for Q1 2025, with total revenue reaching $14.9 billion, marking a 25% year-on-year increase. Consolidated adjusted EBITDA also hit a record $10.1 billion, up 41% year-on-year. Gross margin for the quarter was 79.1%, exceeding initial guidance due to higher infrastructure software revenue and favorable semiconductor revenue mix. Operating income was $9.8 billion, up 44% year-on-year, with an operating margin of 66% of revenue.

Semiconductor solutions revenue for Q1 2025 was $8.2 billion, representing 55% of total revenue and an 11% year-on-year increase. AI-related semiconductor revenue was a standout, contributing $4.1 billion, up 77% year-on-year, driven by strong shipments of networking solutions to hyperscalers. Non-AI semiconductor revenue showed mixed results, with wireless revenue flat year-on-year but down sequentially due to seasonal factors. Broadband showed a double-digit sequential recovery, while server storage was down single digits sequentially but is expected to recover in Q2.

Infrastructure software revenue reached $6.7 billion, up 47% year-on-year and 15% sequentially. This growth was driven by the integration of VMware and the transition from perpetual licenses to subscription-based models. Approximately 70% of Broadcom's largest 10,000 customers have adopted VMware Cloud Foundation (VCF), enabling private cloud environments. The company also introduced the VMware Private AI Foundation, which virtualizes GPUs and CPUs for enterprise AI workloads, in collaboration with NVIDIA.

Broadcom's R&D investments are heavily focused on AI technologies, including the development of the industry's first two-nanometer AI XPU packaging and next-generation networking solutions like the Tomahawk 6 switch. These efforts align with the roadmap of hyperscale customers aiming to scale AI clusters to one million XPUs by 2027. Broadcom reaffirmed its guidance for a serviceable addressable market (SAM) of $60 to $90 billion in fiscal 2027, driven by three major hyperscale customers.

Cash flow and capital allocation were robust in Q1 2025, with free cash flow reaching $6 billion, representing 40% of revenue. Broadcom repaid $1.1 billion in net debt during the quarter and paid $2.8 billion in cash dividends to stockholders. The company ended the quarter with $9.3 billion in cash and $68.8 billion in gross principal debt. Capital expenditures were $100 million, and inventory levels increased by 8% sequentially to support future revenue.

Guidance for Q2 2025 indicates continued strong performance, with consolidated revenue expected to be approximately $14.9 billion, up 19% year-on-year. Semiconductor revenue is projected at $8.4 billion, including $4.4 billion from AI, up 44% year-on-year. Infrastructure software revenue is expected to be $6.5 billion, up 23% year-on-year. Adjusted EBITDA is forecasted to be approximately 66% of revenue.