Broadcom Inc. (NASDAQ:AVGO)

The analysis of the quarterly financial ratios reveals notable trends and fluctuations over the observed periods.

Return on Assets (ROA)

The ROA values start at 4.04% and initially show a slight decline, reaching a low around 3.08%-3.13% between mid-2019 and late 2020. Following this, there is a steady and substantial increase from early 2021, peaking at 19.44% by early 2024. However, after this peak, the ROA experiences a considerable drop to 3.03% by August 2024 before rising again to 11.43% by August 2025. This pattern indicates periods of both accelerating asset profitability and some volatility in asset returns toward the end of the observed timeline.

Financial Leverage

The financial leverage ratio shows a gradual decrease over the entire timeframe. Starting from 3.1 in early 2019, it fluctuates mildly but generally trends downward to a ratio of around 2.26 by August 2025. This downward trend suggests a steady reduction in reliance on debt financing relative to equity, indicating a potentially more conservative capital structure or improved equity base over time.

Return on Equity (ROE)

The ROE presents a strong upward trajectory from 10.92% in early 2019, with a sharp increase commencing in late 2020. It peaks dramatically at 63.03% in late 2023, showing exceptional shareholder returns during this period. However, following this peak, ROE declines steeply to 7.76% by August 2024 but recovers partially to 25.84% by August 2025. This pattern suggests periods of high profitability relative to shareholders' equity, followed by a phase of correction or reduced profitability, and then a moderate recovery.

Overall, the trends indicate improved profitability metrics through much of the period until early 2024, accompanied by a reduction in financial leverage. The sharp declines in the latter periods highlight increased volatility and possible challenges impacting asset and equity returns. The reduction in leverage ratio suggests a strengthening balance sheet which might be in response to the profit fluctuations.

The analysis of the quarterly financial ratios reveals several notable trends in profitability, efficiency, leverage, and overall return to equity holders over the examined periods.

Net Profit Margin

The net profit margin shows a generally upward trajectory starting from approximately 12.05% in early 2020 and peaking near 39.31% by late 2023. This indicates improving profitability on sales over time. However, a significant decline is observed after the peak, with margins dropping sharply to around 10.88% to 11.43% in early-to-mid 2024 before recovering somewhat to 31.59% towards mid-2025. This fluctuation suggests potential operational or market challenges impacting profit retention in 2024, followed by a recovery phase.

Asset Turnover

Asset turnover started low at approximately 0.28-0.33 in early 2020, but demonstrated a steady improvement reaching 0.5 by late 2023, reflecting enhanced efficiency in generating revenues from asset investments. Similar to net profit margin, there is a notable dip to the range of 0.22-0.28 in early 2024, followed by a gradual increase back to about 0.36 by mid-2025. This pattern indicates a temporary reduction in asset utilization effectiveness that improves subsequently.

Financial Leverage

Financial leverage was initially around 3.1 to 3.4 from 2019 through early 2022, indicating a relatively high degree of debt or asset financing reliance. From 2022 onwards, there is a gradual downward trend to about 2.26 by mid-2025. The declining leverage suggests a reduced reliance on debt financing or an increase in equity, potentially aimed at strengthening the balance sheet or reducing financial risk over time.

Return on Equity (ROE)

ROE follows a trend similar to net profit margin, starting near 10.9% in early 2020 and increasing sharply to over 63% by late 2023, indicating substantial improvement in profitability relative to shareholders’ equity. Then, a sharp contraction occurs in 2024, with ROE dropping to a low of around 7.76% before gradually rebounding to approximately 25.84% by mid-2025. This volatility in ROE aligns with the fluctuations in profitability and asset utilization, underscoring periods of operational stress followed by recovery.

In summary, the company experienced significant gains in profitability, asset efficiency, and equity returns from 2020 through 2023, accompanied by a modest reduction in financial leverage. However, a marked dip in key performance ratios occurred in 2024, suggesting external or internal constraints during that period, followed by signs of financial recovery and stabilization into 2025. Continuous monitoring of leverage and asset turnover alongside profit margins will be important for assessing the durability of these improvements.

The financial data reveals several notable trends across the analyzed periods, highlighting evolving operational efficiency, profitability, and capital structure dynamics.

Tax Burden

The tax burden ratio initially fluctuated around values slightly above 1.0 in the early periods, indicating some variability in tax effects relative to pre-tax income. From early 2021 onwards, it showed a steady decline below 1.0, stabilizing between approximately 0.9 and 0.94 through most recent quarters. However, an unusual dip occurred in the quarters ending February 2024 and May 2024, with values dropping to around 0.52 and 0.61 respectively, before recovering modestly towards later quarters. This suggests a period of potentially significant tax benefits or adjustments affecting net income favorably.

Interest Burden

The interest burden ratio showed an improving trend from about 0.54 in late 2019, rising steadily to a peak of approximately 0.9 during 2021 to early 2023, which implies decreasing relative interest expense or improved earnings before interest and taxes. More recently, the ratio tapered down between 0.74 and 0.8 in 2023 and early 2024, with a mild rebound to 0.85 by mid-2025, indicating some fluctuation in interest costs or EBIT levels.

EBIT Margin

Operating profitability demonstrated a strong upward trajectory from around 16% in early 2019 to over 46% by late 2022 and early 2023, reflecting significant margin expansion. Nonetheless, the EBIT margin declined sharply to approximately 26% by late 2024, before recovering to nearly 39% by mid-2025. This pattern suggests a phase of enhanced operational efficiency and pricing power, then a period of margin compression followed by moderate rebound.

Asset Turnover

The asset turnover ratio improved steadily over the full timeframe, beginning near 0.28 in 2019 and advancing to around 0.5 in early 2023. This indicates progressively more effective utilization of assets to generate sales. A notable drop to approximately 0.22 occurred in early 2024, from which it gradually recovered close to 0.36 by the middle of 2025, suggesting a temporary slowdown or higher asset base not matched immediately by revenue growth.

Financial Leverage

Financial leverage ratios remained moderately stable with a slight downward trend over time, declining from the range of about 3.1–3.4 in the earlier years to approximately 2.3–2.5 by mid-2025. This denotes a gradual reduction in reliance on debt financing or equity base changes, contributing to potentially lower financial risk.

Return on Equity (ROE)

ROE exhibited substantial growth from roughly 10.5% in 2019 to a peak exceeding 60% in early 2023, demonstrating extraordinary returns to shareholders driven by improved margins and efficient asset use. Nonetheless, a significant drop to near 7.8% - 8.7% occurred in late 2024, followed by a recovery to around 26% by mid-2025. This volatility correlates with observed fluctuations in margins and asset turnover, as well as tax and interest burden changes.

In summary, the data reflects an overall trend of improving profitability and asset efficiency through 2022 and early 2023, supported by stable leverage and improved interest burden. Subsequent periods reveal a phase of operational and financial stress or market challenges reflected in diminished margins, turnover, and returns before a partial recovery into mid-2025. The marked fluctuations in tax burden and interest burden may also indicate notable changes in the tax environment or capital structure arrangements that materially influenced net returns.

Net Profit Margin

The net profit margin displays a generally increasing trend over the observed periods, starting at 12.05% in early 2020 and peaking at 39.31% around October 2023. This represents a substantial growth in profitability relative to revenue. However, following this peak, there is a notable decline, with the margin dropping to 10.88% by early 2025 before partially recovering to 31.59% by mid-2025. This pattern suggests a period of significant profit efficiency improvement followed by volatility and partial rebound.

Asset Turnover

Asset turnover ratio begins at 0.33 in early 2020, indicating modest efficiency in using assets to generate revenue. It experiences a moderate upward trend, reaching a high of 0.50 in late 2023. Post-peak, it declines sharply to 0.22 by early 2024, then gradually recovers to 0.36 by mid-2025. This indicates varying efficiency in asset utilization, with a peak period of high productivity followed by a dip and moderate recovery.

Return on Assets (ROA)

ROA starts at 4.04% in early 2020, showing initial moderate returns on the company's asset base. It steadily increases, reaching its highest point at 19.44% in late 2023, reflecting enhanced profitability and operational efficiency. After peaking, ROA falls sharply down to 3.03% in early 2025 but then shows improvement, climbing back up to 11.43% by mid-2025. The trend mirrors the net profit margin and asset turnover patterns, suggesting interconnected influences on profitability and asset efficiency.

Tax Burden

The tax burden ratio shows a general downward trend from early 2020, beginning around 1.23 and declining steadily through the periods until late 2023, reaching values below 1. From early 2024, there is some recovery, with the ratio increasing from 0.52 up to 0.96 by mid-2025. This indicates a reduction in tax expenses relative to pre-tax profits over the earlier periods, followed by a partial reversal in recent quarters.

Interest Burden

The interest burden ratio exhibits fluctuations but generally maintains a position below 1 throughout the timeframe. Starting around 0.61 in early 2020, it declines slightly until mid-2020, then increases steadily and peaks near 0.90 between early 2022 and late 2023. Afterward, it dips to approximately 0.71 in early 2024 before rising again to 0.85 by mid-2025. This pattern suggests varying levels of interest expense impact on earnings before tax, with improved coverage during 2022–2023 followed by some weakening and a subsequent partial recovery.

EBIT Margin

The EBIT margin demonstrates a clear upward trajectory over most of the observed period. Beginning near 16% in early 2020, the margin increases sharply across subsequent quarters, peaking above 46% in late 2023. From early 2024 onwards, the margin declines significantly down to around 26% before recovering somewhat to nearly 39% by mid-2025. This pattern reflects enhanced operational profitability over the long term, with a notable contraction in early 2024 followed by a moderate rebound.

Asset Turnover

Asset turnover starts at approximately 0.33 in early 2020, decreasing slightly mid-year, then progressively increases to almost 0.50 by late 2023. However, in early 2024, it sharply declines to a low near 0.22 before gradually rising again to 0.36 by mid-2025. The trend indicates improved efficiency in asset utilization over most of the timeframe, interrupted by a pronounced drop in early 2024, with gradual recovery thereafter.

Return on Assets (ROA)

The ROA displays consistent improvement from early 2020, rising from about 4% to a peak near 19% in late 2023. Subsequently, the ROA falls sharply to around 3% in early 2024, followed by a recovery to approximately 11% by mid-2025. This trend suggests increasing overall profitability relative to asset base for most of the period, disrupted by a marked decline in early 2024 and ongoing recuperation.

Summary of Observations

Overall, the financial ratios indicate a period of strengthening operational efficiency and profitability up until late 2023. Key metrics such as EBIT margin, asset turnover, and ROA progressively improved, reflecting enhanced earnings quality and asset utilization. Conversely, the tax and interest burdens show variable impacts on profitability, with a general reduction in tax burden and fluctuating interest burden levels.

A notable shift occurs around early 2024, marked by declines in EBIT margin, asset turnover, and ROA, as well as a drop in tax burden ratio. These changes suggest a challenging quarter or series of quarters impacting profitability and efficiency metrics. Following this period, a recovery phase is evident, with gradual improvements in most ratios through mid-2025, indicating potential stabilization and renewed operational gains.

Tax Burden Trend

The tax burden ratio exhibits a declining pattern overall. Initially, it remains above 1.0 for the earlier periods, indicating that taxes may have been impacting earnings negatively. From early 2021 onwards, the ratio consistently falls below 1.0, dropping as low as 0.52 in the period around May 2024, which suggests a notable reduction in tax expense relative to pre-tax income. Towards the latest periods, there is a moderate recovery back to around 0.96, indicating some increase in tax impact but still lower than in the earliest periods.

Interest Burden Trend

The interest burden ratio starts relatively low around 0.61 and continues to decline slightly until around August 2020, hitting 0.55. From late 2020, the ratio steadily increases, peaking at about 0.9 from early 2022 through early 2024, implying improved earnings before interest and taxes relative to earnings before taxes, potentially reflecting reduced interest expenses or improved operating performance. In the most recent periods, there is a mild decrease back to the mid-0.8 range, but overall the interest burden remains healthier than earlier years.

EBIT Margin Analysis

The EBIT margin shows a marked upward trajectory from about 16% in early 2019 to a peak of approximately 46% by early 2023. This indicates substantial improvement in operational profitability over the analyzed timeframe. However, after reaching this peak, the margin declines to around 26% by early to mid-2025 before showing signs of recovery towards late 2025, rising back above 35%. This pattern suggests a period of margin contraction possibly due to increased costs or lower sales, followed by operational stabilization or improvement.

Net Profit Margin Analysis

The net profit margin closely follows a similar trend to EBIT margin initially, rising steadily from around 12% in early 2019 to nearly 40% by early 2023, reflecting enhanced overall profitability after all expenses and taxes. Subsequently, there is a sharp decline to about 11% by mid-2025, which is steeper and more pronounced than the EBIT margin decline, indicating that non-operational factors such as taxes or interest might have negatively influenced net profitability during this period. Toward the end of the dataset, there is a strong rebound with net profit margin increasing to over 31%, suggesting recovery in overall profitability.

Overall Insights

Across the given periods, the company demonstrates significant growth in operational performance and profitability up to early 2023, driven by improved EBIT and net profit margins. The interest burden generally improves over time, indicating better management of interest expenses or capital structure. The tax burden decreases markedly, improving net profitability, though fluctuations indicate variability in tax impact. The post-2023 period presents challenges with declining margins, particularly net profit margin, before a recovery phase, highlighting a volatile but resilient profitability profile.