Broadcom Inc. (AVGO) is navigating heightened market scrutiny as investor confidence wavers over its software segment, despite strong performance in its core semiconductor business. With shares under pressure near $1,020, Wall Street awaits earnings for clarity on whether software integration can drive long-term growth.
- Software now makes up 35% of Broadcom’s total revenue, up from 28% in 2023
- AVGO’s software segment trades at a forward P/E of 36, compared to 22 for semiconductors
- Total FY2025 revenue reached $32.4 billion, up 12% YoY
- VMware’s subscription revenue grew 18% YoY but operating margin remains below 40%
- AVGO stock has underperformed the S&P 500 by 8 percentage points over 12 months
- Oil prices (CL=F) rose 4.2% in March 2026, increasing tech supply chain costs
Broadcom (AVGO) has long been a dominant force in the semiconductor industry, but recent market dynamics have spotlighted a growing concern: the company’s expanding software business. While hardware sales continue to generate robust revenue—contributing approximately 65% of total Q4 2025 results—software licensing and subscriptions now account for nearly 35% of consolidated revenue, up from 28% in 2023. This shift has raised questions about valuation multiples, with the software portion trading at a forward P/E of 36, significantly above the semiconductor segment’s 22, reflecting investor skepticism about sustainability. The tension is particularly evident in Wall Street’s pricing behavior. Despite AVGO’s $32.4 billion in total revenue for FY2025, up 12% year-over-year, the stock has underperformed the S&P 500 by 8 percentage points over the past 12 months. Analysts point to investor hesitance toward software-driven tech firms with high growth expectations and uneven margins. Apple (AAPL), a major customer for Broadcom’s chips and a key partner in its software ecosystem, has also seen its own stock dip by 6% in the past month, adding to sector-wide caution. Market watchers are closely monitoring Broadcom’s upcoming earnings release for signals on software retention rates, customer churn, and recurring revenue growth. A key metric to watch is the expansion of its cloud infrastructure software—particularly its VMware division—which reported 18% year-over-year growth in subscription revenue. However, the segment’s operating margin remains below 40%, below the 52% average for its hardware business. If Broadcom can demonstrate stronger software scalability and margin improvement, the valuation gap between its hardware and software arms may narrow. Otherwise, continued investor skepticism could limit upside, especially in a volatile macro environment where oil prices (CL=F) have risen 4.2% this month, increasing cost pressures across tech supply chains.