Broadcom Inc. (NASDAQ:AVGO)

Return on Assets (ROA)

The ROA exhibited a steady upward trend from January 2021 through October 2023, increasing from 5.14% to a peak around 19.44%. This indicates improving efficiency in asset utilization over this period. However, starting February 2024, the ROA sharply declined to lower levels between approximately 3.03% and 6.54% before gradually recovering to 13.52% by November 2025. This pattern suggests a significant downturn followed by a gradual return towards prior performance levels.

Financial Leverage

Financial leverage showed a moderate declining trend over the entire timeframe. Initially, leverage ratios fluctuated around the low 3.0s, reaching a high of 3.42 in May and July 2022, then consistently decreased to 2.10 by November 2025. The steady reduction in leverage implies a progressive deleveraging strategy or balance sheet strengthening, reducing reliance on debt financing over time.

Return on Equity (ROE)

ROE followed a pattern broadly similar to ROA, but with more pronounced changes. From January 2021 to October 2023, ROE increased sharply from 16.49% to a high of approximately 63.03%, indicative of strong profitability and effective equity utilization. Post-October 2023, ROE experienced a significant decline, bottoming near 7.76% in August 2024, then showing a gradual improvement reaching 28.45% by November 2025. This drop and recovery cycle likely reflects a period of operational or market challenges followed by stabilization and recovery.

Summary of Trends

Overall, the company demonstrated notable growth in profitability metrics (ROA and ROE) through most of the initial timeframe, coupled with a moderately high but then gradually decreasing leverage ratio. The sharp decline in profitability metrics beginning early 2024 suggests adverse conditions or transitional headwinds affecting asset and equity returns. However, the subsequent recovery in both ROA and ROE, alongside continued deleveraging, points to an effective response and potential strengthening of the financial position moving into late 2025.

The financial data reveals distinct trends across four key performance indicators over the analyzed periods. These indicators include Net Profit Margin, Asset Turnover, Financial Leverage, and Return on Equity (ROE).

Net Profit Margin

Initially, the net profit margin demonstrated a consistent upward trajectory, rising from approximately 16.01% to a peak of about 39.31% through the middle of the timeline. This growth reflects a considerable improvement in profitability. Following the peak, there was a notable decline in margin to around 10.88%, which then displayed moderate recovery, ending at approximately 36.2%. The volatility observed in the latter periods suggests external or internal factors influencing profitability margins significantly.

Asset Turnover

Asset turnover showed a gradual but steady increase from 0.32 in the earliest period to 0.50, indicating increasing efficiency in using assets to generate sales. However, after this peak, a sharp drop occurred to 0.22, followed by a slow, steady recovery toward the end of the timeline, reaching 0.37. This pattern points to fluctuations in asset utilization efficiency, possibly reflecting changes in sales volume or asset base adjustments.

Financial Leverage

Financial leverage ratios initially decreased slightly from 3.21 to about 3.03, fluctuated upwards to a high near 3.42, then gradually declined towards 3.04. In the later periods, a sharper decline was observed, with ratios falling steadily to 2.10 by the end. This trend suggests a strategic reduction in leverage, which may indicate a move towards lower reliance on debt financing over time.

Return on Equity (ROE)

ROE exhibited a strong rising trend, increasing from 16.49% to a high of approximately 63.03%, reflecting enhanced profitability and effective equity utilization. This was followed by a significant drop to about 7.76%, then a gradual recovery back to around 28.45%. The fluctuations mirror those seen in net profit margin and financial leverage, indicating interconnected impacts on overall equity returns.

Overall, the data reflects periods of robust profitability and efficiency improvements interspersed with phases of decline and recovery. The late-period reductions in financial leverage alongside the recovery in profitability and efficiency ratios could indicate adjusted financial strategy and operational realignment. The interrelated nature of these metrics suggests that shifts in profitability margins and asset efficiency are closely tied to changes in capital structure and equity returns.

The analysis of the financial ratios over the observed periods reveals multiple trends related to profitability, operational efficiency, leverage, and overall equity returns for the company.

Tax Burden

The tax burden ratio displayed a general decreasing trend from above 1.1 in early 2021 down to approximately 0.92 by late 2023, indicative of improved tax efficiency or changes in tax expense relative to pre-tax income. However, from early 2024 onward, there was a notable decline to as low as 0.52 in mid-2024, followed by a progressive increase back above 1.0 by late 2025. This fluctuation suggests variability in tax obligations or benefits impacting net profitability unevenly in these years.

Interest Burden

This ratio steadily improved over time from 0.64 in early 2021 to around 0.9 in late 2023, indicating a reduced interest expense relative to earnings before interest and taxes (EBIT). A slight reduction occurred starting in early 2024, declining to 0.74 by mid-2024, before recovering gradually to 0.88 by late 2025. This pattern implies better management or refinancing of debt initially, with some fluctuations likely due to changes in interest rates or debt levels in subsequent periods.

EBIT Margin

The EBIT margin rose significantly from about 22% in early 2021 to a peak near 47% by late 2023, reflecting strong improvements in operating profitability. Post-2023, this margin contracted notably to a low of 26% in mid-2024, followed by a recovery trend reaching over 40% by late 2025. These movements highlight a period of operational challenge or increased costs during early 2024, with gradual restoration of profitability thereafter.

Asset Turnover

Asset turnover exhibited a consistent gradual improvement from 0.32 in early 2021 up to roughly 0.5 by late 2023, which suggests enhanced efficiency in utilizing assets to generate revenue. A marked decline occurred in early 2024 to about 0.22, with a steady but slow recovery to approximately 0.37 by late 2025. This may indicate asset base expansion or revenue softness impacting asset efficiency during the mid-period.

Financial Leverage

Financial leverage ratios showed a slight decrease from values above 3.2 in early 2021 to near 3.0 by late 2023, suggesting a modest reduction in debt reliance relative to equity. From early 2024 onward, leverage dropped more sharply below 2.6, continuing to decline to approximately 2.1 by the end of the observation period. This implies a strategic deleveraging or increased equity base during this later timeframe.

Return on Equity (ROE)

The ROE displayed a robust upward trend from approximately 16.5% in early 2021 to a peak of over 63% in late 2023, indicating exceptional profitability and effective use of shareholder equity during this period. However, from early 2024, ROE fell sharply, hitting lows below 8%, and then experienced a partial rebound to near 28% by late 2025. This volatility correlates with the fluctuations in EBIT margin and financial leverage observed, reflecting changing profitability drivers and capital structure adjustments.

In summary, the analysis reveals an initial phase marked by strong improvements in profitability, efficiency, and leverage management until late 2023, followed by a period of notable deviation in early to mid-2024 characterized by declines in profitability, asset efficiency, and ROE as well as ongoing reduction in leverage. By late 2025, a recovery is evident across most metrics, suggesting a return toward operational stability and improved financial performance.

Net Profit Margin

The net profit margin exhibited a consistent upward trend from early 2021 through late 2023, increasing from 16.01% to a peak of approximately 39.31%. This steady growth indicates improving profitability relative to revenue over this period. However, starting in early 2024, there is a notable decline, with the margin dropping significantly to 10.88% by August 2024. Subsequently, a recovery is observed, with margins rising again and reaching 36.2% by November 2025. This pattern suggests a temporary disruption affecting profitability in early 2024, followed by a gradual return to higher profit levels.

Asset Turnover

Asset turnover ratios demonstrated gradual improvement from 0.32 in early 2021 to a high of 0.50 in mid-2023, reflecting enhanced efficiency in generating sales from assets. From late 2023 to early 2024, the ratio sharply declined to around 0.22 and remained relatively low through mid-2024, implying a reduction in asset utilization efficiency during this timeframe. Post this period, asset turnover shows a steady recovery, climbing back to 0.37 by the end of 2025, indicating a restoration of operational efficiency.

Return on Assets (ROA)

Return on assets tracked a similar trajectory to net profit margin, increasing consistently from 5.14% in early 2021 to close to 19.44% in mid-2023, reflecting enhanced profitability relative to asset base. A pronounced downturn occurred starting early 2024, with ROA falling below 4% by August 2024, signaling diminished asset profitability. From that point forward, ROA gradually improved, reaching 13.52% by November 2025, which suggests a recovery in the company’s ability to generate earnings from its assets after a period of underperformance.

Overall Analysis

The analyzed financial ratios indicate a period of strong operational performance and profitability from 2021 through 2023. A significant decline in profitability and efficiency metrics is evident in early 2024, potentially attributable to an internal or external disruption affecting the company's operations or market conditions. Following this downturn, all key ratios progressively recover through 2025, demonstrating resilience and a return to more favorable financial performance. This cyclical pattern highlights phases of robust growth, temporary stress, and eventual recovery within the evaluated timeline.

The analysis of the financial ratios over the observed periods reveals several notable trends in operational efficiency, profitability, and financial burden.

Tax Burden

The tax burden ratio exhibited a generally declining trend from early 2021 through late 2023, decreasing from 1.12 to roughly 0.92-0.94, indicating a reduction in taxes relative to earnings before tax during this time. However, starting in early 2024, there was a significant decrease to 0.52 followed by a gradual increase through 2025, ending close to 1.02. This pattern suggests fluctuations in effective tax rates that could be due to changes in tax policies or shifts in pre-tax profitability.

Interest Burden

The interest burden ratio showed a steady increase from 0.64 in early 2021 to approximately 0.9 by late 2023, denoting improved capacity to cover interest expenses from operating earnings or reduced interest expenses relative to earnings. In 2024, this ratio dipped to 0.86 and continued declining to a low of 0.71 by late 2024. Subsequently, it reversed course and rose again, reaching 0.88 by late 2025. This reflects varying interest expense pressures, possibly influenced by changes in debt levels, interest rates, or operating income volatility.

EBIT Margin (%)

The EBIT margin demonstrated a strong and steady upward trajectory from 22.11% in January 2021 to a peak exceeding 46% in late 2023, underscoring significant improvement in operating profitability and cost controls. Nevertheless, a marked decline occurred in early 2024, dropping to around 26-32%, followed by a recovery trend rising back towards 40.6% by the end of 2025. This volatility in margins suggests periods of increased operating challenges or strategic investments impacting earnings before interest and tax, later offset by efficiency gains.

Asset Turnover

Asset turnover ratios exhibited a gradual increase from 0.32 in early 2021 to roughly 0.49-0.50 by late 2023, reflecting enhanced efficiency in utilizing assets to generate revenue. A significant drop occurred in early 2024, falling as low as 0.22 before incrementally rising to 0.37 by the end of 2025. This trend implies fluctuations in asset management efficiency or changes in the asset base composition relative to revenue generation during the period.

Return on Assets (ROA) (%)

The ROA increased steadily from 5.14% in early 2021 to nearly 19.44% in late 2023, indicating improving overall profitability relative to asset base. However, a sharp reduction took place starting in early 2024, with ROA dropping to around 3%, followed by a gradual recovery to 13.52% by late 2025. This pattern reveals material impacts on the company's ability to generate profits from its assets, possibly due to operational disruptions, investment cycles, or external economic factors.

Overall, the financial ratios indicate a period of pronounced improvement in profitability and operational efficiency from 2021 through 2023, followed by a phase of significant contractions in 2024 across most metrics, then a partial to strong recovery during 2025. These fluctuations highlight dynamic financial conditions requiring further investigation into specific underlying causes such as market environment changes, tax regimes, financing costs, and asset utilization strategies.

Tax Burden

The tax burden ratio exhibited a general declining trend from early 2021 through the end of 2023, moving from values above 1.0 down to around 0.92-0.94. This suggests a reduction in effective tax expenses relative to earnings. However, from early 2024 onward, the ratio showed notable volatility, dropping sharply to as low as 0.52 before rising again and fluctuating near or slightly above 1.0 by the end of the observed period. This variability may indicate changes in tax strategy, tax credits, or shifts in taxable income composition.

Interest Burden

The interest burden ratio demonstrated a consistent upward trend from January 2021 to October 2023, increasing from 0.64 to approximately 0.9. This indicates improving operational efficiency in managing interest expenses and debt servicing costs relative to earnings before interest and taxes. After peaking, the ratio declined somewhat during 2024, falling to about 0.7-0.8 but then showed a gradual recovery toward 0.88 by late 2025, reflecting some fluctuations in financing costs or debt levels.

EBIT Margin

The EBIT margin displayed a steady increase over the majority of the timeframe from 22.11% in early 2021 to a peak near 46.68% by the end of 2023. This growth reflects significant improvement in operating profitability. Starting in 2024, the margin declined substantially to a low of around 26%, indicating margin compression potentially due to increased costs or competitive pressures. In the latter half of the period, the EBIT margin recovered strongly, ending close to 40.6%, suggesting a positive operational turnaround or enhanced cost control measures.

Net Profit Margin

Net profit margin trends mirrored those of the EBIT margin, rising steadily from 16.01% in January 2021 to nearly 39.31% by the end of 2023, indicating strong growth in bottom-line profitability. The margin then experienced a sharp decline in 2024, falling to a low near 10.88%, a significant contraction likely linked to extraordinary costs, tax impacts, or other non-operational factors. Following this downturn, the net profit margin showed a progressive recovery through 2025, reaching over 36%, aligning with improvements in operating margins and cost of financing.