What Happened?

Shares of fabless chip and software maker Broadcom (NASDAQ:AVGO) jumped 14.3% in the pre-market session after the company reported impressive first-quarter 2025 results, with revenue and EPS surpassing Wall Street expectations, driven by strong demand in AI semiconductor and infrastructure software segments. The standout figure was AI revenue, which surged 77% year on year, reflecting growing investments from hyperscale customers. This helped lift total revenue by 25% compared to the previous year. Profitability also showed significant improvement. Operating margins expanded meaningfully, with adjusted EBITDA climbing 41% year on year. Free cash flow rose 28%, highlighting disciplined capital allocation. These factors combined to deliver a strong EPS beat. Looking ahead, the company guided for second-quarter revenue in line with expectations, while Adjusted EBITDA guidance beat analysts' estimates, suggesting stable profitability. 

Overall, this was a strong quarter, showcasing Broadcom's leadership in AI and infrastructure software.

After the initial pop the shares cooled down to $187.21, up 4.3% from previous close.

Is now the time to buy Broadcom? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Broadcom’s shares are very volatile and have had 28 moves greater than 5% over the last year. But moves this big are rare even for Broadcom and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was 4 days ago when the stock dropped 6.3% on the news that the major indices tumbled after the Trump administration confirmed that the planned 25% tariffs on imports from Canada and Mexico, two of the largest trading partners of the United States, would proceed as planned. 

The news added to the market's growing unease, which had been building since the start of 2025. For Wall Street analysts, investors, and businesses, the announcement underscored the urgent need to plan ahead and factor the potential downside of the tariffs into their financial forecasts. Key concerns included rising production costs, which are often passed on to consumers, and the risk of inflation, further heightening economic uncertainty.

Broadcom is down 19.3% since the beginning of the year, and at $187.21 per share, it is trading 25.1% below its 52-week high of $250 from December 2024. Investors who bought $1,000 worth of Broadcom’s shares 5 years ago would now be looking at an investment worth $7,557.

Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.