Broadcom Inc. (AVGO) stock intrinsic value fair value estimate & owner earnings analysis

Broadcom sells two things: semiconductors (custom AI accelerators, Ethernet switching and networking chips, wireless, broadband and storage chips) and infrastructure software (VMware virtualization and cloud, plus mainframe, security and enterprise software acquired earlier). Fiscal 2025 revenue was $63.9 billion, up 24%, and nine-month fiscal 2026 revenue is $71.1 billion versus $45.9 billion a year earlier, with the latest quarter at $29.6 billion. How we measure earnings. We start from operating cash flow and deduct stock compensation in full ($7.6 billion in fiscal 2025), normal upkeep capital spending (small, about $0.3 billion), and set aside swings in receivables, inventory and payables. Per diluted share, that gives $1.67 in fiscal 2019, $3.81 in 2022, $3.50 in 2024 (VMware integration year) and $5.06 in 2025, up 45% in the last year. Large amortization of acquired intangibles ($8.2 billion in 2025) is a non-cash charge and is not deducted; instead it is reflected by not assuming growth beyond what is secured. Cash taxes and long-term liability payments stay in as real costs. Starting level. Business as it exists today began with the VMware acquisition in late 2023. Fiscal 2025 ($5.06) was the first full year, but three straight fiscal 2026 quarters have run well above it: nine-month operating cash flow is $33.0 billion against $27.5 billion for all of fiscal 2025, and on the same method we estimate roughly $6.5 per share already earned in nine months. We start at $6.50 per share, treating the fourth quarter as unearned. This is a jump of 29% over fiscal 2025, below the 45% actually achieved last year; it reflects earnings already reported, not forecasts. Base case: $87 per share. Earnings stay at $6.50 for 15 years with no growth credited, then decline about 5% a year as today's product generations age. What supports it: VMware and other software contracts carry $33.3 billion of committed remaining revenue (about 35% within 12 months), and Broadcom has held or grown its franchises in networking, wireless and storage chips through repeated cycles. What we leave out: further AI accelerator growth (no contracted volumes are disclosed in the filing), more acquisitions (each is a large, individual bet) and margin gains. Bear case: $44. Roughly 40% of revenue comes from five end customers and one distributor is 32% of revenue, so a lost design win or order pause has real weight. Earnings slip from $5.00 to $4.40 and then settle at $3.80 (the 2022 to 2025 median) for the rest of the decade, then fall 8% a year. Broadcom also carries substantial debt taken on for VMware, which makes a weak year worse. Bull case: $120. The recent run rate holds: the latest quarter's $29.6 billion revenue is already reported, and annualizing it implies about $8.50 of owner earnings per share. We hold that level for 15 years, then decline 3% a year, on the strength of the customer concentration turning into multi-year custom-chip relationships rather than orders that lapse. What could make this wrong: the AI-related demand behind fiscal 2026 could fall well short of the current run rate (the bear case), or the recent quarters could prove sustainable and growing (above our bull case). We tested the anchor against the fact that receivables rose $6.5 billion and inventory $2.3 billion in nine months of fiscal 2026 with revenue up 55%; this growth investment is stripped from our earnings, so if customers were slow to pay it would matter. Some large recent cash items (a $3.6 billion long-term liability outflow in fiscal 2025) could not be fully explained from the summary data and are left in as costs. The margin-of-safety price is around $48 per share, a discount of about 45% to the base case and a little above the bear case, reflecting customer concentration, leverage and cyclical semiconductor exposure.