AVGO — Broadcom Inc.
- Net margin
- 9%
- ROIC
- 50%
- Owner Earnings
- $26.9B
Read as a Asset-light compounder business — little inventory and a 68% gross margin — the value is in IP and people, not factories.
The record — 2016–2025
realized figures from each filing — no estimates| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | TTMMay 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $13.2B | $17.6B | $20.8B | $22.6B | $23.9B | $27.4B | $33.2B | $35.8B | $51.6B | $63.9B | $75.5B |
| Gross margin | 45% | 48% | 51% | 55% | 57% | 61% | 67% | 69% | 63% | 68% | 68% |
| Operating margin | −3.1% | 13.4% | 24.6% | 15.2% | 16.8% | 31.0% | 42.8% | 45.2% | 26.1% | 39.9% | 43.4% |
| Net income | ($1.7B) | $1.7B | $12.3B | — | — | — | $11.5B | $14.1B | $5.9B | — | $5.9B |
| EPS (diluted) | $-0.46 | $0.41 | $2.88 | — | — | — | $2.72 | $3.30 | $1.23 | — | $1.21 |
| Owner earnings | $2.7B | $5.5B | $8.2B | $9.3B | $11.6B | $13.3B | $16.3B | $17.6B | $19.4B | $26.9B | $32.8B |
| Owner earnings margin | 20.3% | 31.1% | 39.5% | 41.0% | 48.6% | 48.5% | 49.1% | 49.2% | 37.6% | 42.1% | 43.4% |
| ROIC | — | 9% | 13% | 5% | — | — | — | — | — | — | 39% |
| Book value / share | — | $4.88 | $6.27 | $6.03 | — | — | — | — | — | — | $5.11 |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? 7.9×ComfortableOperating income $25.5B ÷ interest expense $3.2B
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient — it says solvent, not cheap.
- How heavy is the debt? 1.7×ConservativeTotal debt $42.6B ÷ operating income $25.5B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- How long is cash tied up? 53dTightDSO 41 + DIO 40 − DPO 28 days
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.
Is it a good business?
- Return on invested capital 50%ExceptionalNOPAT $25.5B ÷ invested capital $51.4B (debt + equity − cash)
The rate the business earns on the money tied up in it — Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high — pair this with Owner Earnings.
- Owner Earnings (free cash) margin 42%Cash machineOwner Earnings $26.9B = operating cash $27.5B − capex $623M
What an owner could take out without starving the business. That's 42% of revenue. Treating stock comp as the real expense it is (less $7.6B of SBC) leaves $19.3B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Are earnings backed by cash? 4.67×Cash-backedCash from ops $27.5B ÷ net income $5.9B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy — growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Where do the earnings go? 51%Returns about halfDividends + buybacks $13.6B ÷ Owner Earnings $26.9B
Of $26.9B Owner Earnings, $13.6B (51%) went back to shareholders — $11.1B dividends, $2.5B buybacks. But the buybacks barely exceed stock issued to employees ($7.6B SBC) — net of dilution, little was truly returned. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway — or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? —Not enough data
The filing data didn't include the inputs for this check.
Durability & moat — 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says — judgments, not another chart of the numbers.
- Profitable years 5 of 6
Lost money in 1 year(s) — look at what happened there before trusting the average.
- Return on capital ≥ 15% 0 of 3 yrs
A moat shows up as a high return on invested capital that holds year after year — not one good vintage.
- Operating margin 5% → 33%
Margins are widening — pricing power intact or improving.
- Reinvestment — incremental ROIC returns capital
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
- Owner earnings growth +21%/yr
Free cash to owners grew about 21% a year over the record.
- Worst year 2016 · −3.1% op. margin
Operations went underwater in 2016 — understand why before trusting the good years.
- Dividend record rising
Paid and raised the dividend across the record — the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict — the judgment is yours, and the filing is one click away.
Peers — Asset-light compounder
The same business model, side by side on owner economics — compare, don't rank by a single number. ● marks best in the group.