How AVGO (Broadcom) Makes Money in 2025: A Deep-Dive With Income Statement

Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io

Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.

Understanding how a semiconductor and infrastructure software leader like AVGO (formerly Broadcom Inc.) makes money is essential for investors and anyone interested in the business of technology and enterprise software. In this post, we break down AVGO's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick AVGO Overview

AVGO operates a diversified business model focused on semiconductor solutions and infrastructure software. Its core products include advanced chips for networking, wireless communications, storage, and enterprise software platforms for IT management and security. Revenue comes primarily from selling semiconductor components to OEMs and cloud providers, as well as licensing and subscriptions for infrastructure software. The company reports in two main segments: Semiconductor Solutions and Infrastructure Software.

Revenue Breakdown

• Total Revenue (Q3 2025): $16.0B (+22.0% YoY)
  • Semiconductor Solutions Revenue: $9.166B (57.5% of total, +26.0% YoY)
  • Infrastructure Software Revenue: $6.786B (42.5% of total, +17.0% YoY)
  • Growth is powered by cloud infrastructure demand, AI chip sales, and enterprise software adoption.

Gross Profit and Margins

• Gross Profit: $10.7B (67.1% gross margin)
  • Cost of Revenue: $5.249B (+11.3% YoY)
  • AVGO maintains robust margins due to its scalable digital business model, high-value chip designs, and recurring software revenue.
• Most costs come from manufacturing, supply chain logistics, and software platform maintenance.

Operating Income and Expenses

• Operating Income: $5.887B (+55.4% YoY, 36.9% margin)
• Operating Expenses: $4.816B (+5.4% YoY)
  • R&D: $3.050B (+29.6% YoY, 19.1% of revenue) — Focused on AI chips, next-gen networking, and software innovation
  • SG&A: $1.072B (-2.5% YoY, 6.7% of revenue) — Covers sales, marketing, and administrative functions
  • AVGO continues to prioritize innovation and invest in growth while maintaining efficiency in its operations.

Net Income

• Pre-Tax Income: $5.285B (+88.3% YoY, 33.1% margin)
• Income Tax: $1.145B (21.7% effective tax rate)
• Net Income: $4.140B (flat YoY, 26.0% net margin)
• AVGO converts a significant portion of sales into profit due to scalability, operational efficiency, and strong pricing power.

Most investors waste time on the wrong metrics. We've spent 10,000+ hours perfecting our value investing engine to find what actually matters.

Want to see what we'll uncover next - before everyone else does?

Find Hidden Gems First!

What Drives AVGO's Money Machine?

• Semiconductor Solutions: 57.5% of revenue — Driven by AI, cloud, and networking chip sales
• Infrastructure Software: 42.5% of revenue — Recurring revenue from enterprise software subscriptions
• R&D Investment: $3.050B in Q3 2025, targeting AI, security, and next-gen connectivity
• Future Growth Areas: AI accelerators, cloud security, and edge computing, though not yet profitable at scale

Visualizing AVGO's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially R&D) taking the largest chunk.
• Even after large investments in innovation, 26% of revenue drops to the bottom line.

Key Takeaways

• AVGO's money comes overwhelmingly from semiconductor solutions and infrastructure software
• High gross and net margins illustrate the power of AVGO's scalable, diversified business model
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by AI, cloud infrastructure, and enterprise software adoption

Explore More Investment Opportunities

For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:

📌 50 Undervalued Stocks (Best) overall value plays for 2025
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)

🔍 Check out these stocks on the Value Sense platform for free!

FAQ About AVGO's Income Statement

1. What is the main source of AVGO's revenue in 2025?

AVGO generates over 57% of its revenue from Semiconductor Solutions, including chips for networking, wireless, and AI. The remaining 42% comes from Infrastructure Software, such as enterprise IT management and security platforms.

2. How profitable is AVGO in Q3 2025?

AVGO reported net income of $4.140B in Q3 2025, with a net margin of approximately 26%, reflecting strong profitability driven by high-value products and efficient operations.

3. What are the largest expense categories for AVGO?

The biggest expenses on AVGO's income statement are operating expenses, particularly Research & Development (R&D) at $3.050B in Q3 2025, as AVGO prioritizes AI, networking, and software innovation. SG&A expenses were $1.072B, supporting sales and administration.

4. Why does Infrastructure Software operate at a loss?

Infrastructure Software, despite generating $6.786B in revenue, posted an operating loss of over $XXB in Q3 2025. This is because AVGO aggressively invests in cloud security and next-gen software platforms, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does AVGO's effective tax rate compare to previous years?

AVGO's effective tax rate in Q3 2025 was 21.7%, consistent with previous years. This moderate rate is primarily due to tax benefits from share-based compensation and international structuring.