Cash is Always King Which is Why I Will Not Stop Adding Broadcom

I support hitting the bargain fastener connected Broadcom (NASDAQ:AVGO) due to the fact that Hock Tan is moving a spot institution with the currency mechanics of a bundle business, and my status relationship wants to ain that commercialized for years. Wall Street is tense astir AI superior spending eating escaped currency travel crossed the sector. Broadcom is answering that interest with a receipt each 90 days.

The Cash Machine Doing the Talking

In fiscal Q2 2026, Broadcom generated $10.262 cardinal successful escaped currency flow, oregon 46% of revenue. Full fiscal 2025 escaped currency travel came successful astatine $26.914 billion, up 38.63% twelvemonth implicit year. Capital expenditures ran conscionable $623 cardinal for the afloat twelvemonth against $27.5 cardinal successful operating currency flow. That is simply a semiconductor institution converting gross to proprietor currency astatine software-like ratios, and it is wherefore I support adding.

Hock Tan spelled it retired connected the June call: "Broadcom achieved grounds revenue, operating nett and escaped currency travel successful Q2 driven by accelerating maturation successful AI semiconductor gross and beardown operating leverage." Adjusted EBITDA borderline deed 69% of revenue. Operating borderline printed 67%. Those are toll-road numbers, the benignant bundle businesses print.

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Backlog That Underwrites the Dividend

The 2nd crushed my digit keeps hovering: visibility. Broadcom entered 2026 with an AI backlog exceeding $73 billion, and Q2 unsocial booked $30 cardinal successful AI orders against $10.8 cardinal shipped. Q3 AI gross is guided to $16.0 billion, up implicit 200% twelvemonth implicit year, and Tan reiterated a extremity to transcend $100 cardinal successful AI semiconductor gross successful 2027. Add successful the $30 billion-plus Apple customized AI spot woody moving done 2031 and I tin spot the signifier of the currency flows backing my dividend checks for years.

That dividend, by the way, conscionable marked its 15th consecutive yearly summation since fiscal 2011. Q2 dividends paid: $3.1 billion. Q1 buybacks: $7.8 billion. This institution is returning currency portion investing successful a decade-long AI ramp.