Broadcom Inc. (NASDAQ:AVGO)

The analysis of the financial activity over the observed periods reveals several notable trends and fluctuations in the company's operational efficiency measures.

Inventory Turnover

The inventory turnover ratio exhibits a general declining trend from early 2020 through late 2022, decreasing from approximately 10.73 to around 5.77, indicating slower inventory movement during this interval. However, starting in early 2023, there is a recovery trend with ratios increasing towards 10.83 by late 2024, before moderating slightly thereafter. Correspondingly, the average inventory processing period lengthens from 34 days to a peak around 63 days by late 2022, then shortens back towards mid-30 days by 2025, reflecting the inverse relationship between turnover and days in inventory.

Receivables Turnover

This ratio generally climbed from 6.21 in early 2020 to a peak of about 13.25 in late 2021, suggesting improved efficiency in collecting receivables during this time frame. Subsequently, the ratio shows some volatility, falling notably in mid-2024 to near 7.75 and ending around 9.23 by mid-2025. The average receivable collection period declines from around 59 days to as low as 28 days by late 2021, then trends upward to close to 40 days by mid-2025, mirroring the turnover ratio movements.

Payables Turnover

Payables turnover displays variability without a clear persistent trend but features several peaks, such as a sharp increase to 15.27 in mid-2022 and another surge to nearly 14.92 in mid-2025. The average payables payment period fluctuates between roughly 24 and 44 days, showing some correlation with payables turnover inversely, as expected.

Working Capital Turnover

The working capital turnover ratio remains relatively stable, mostly ranging between 2.5 and 5 through early 2024, but displays extreme anomalies thereafter, notably a spike to over 681 in early 2025, which appears to be an outlier or data irregularity. Excluding this anomaly, the later periods show elevated turnover ratios compared to earlier years, indicating enhanced utilization of working capital at those points.

Operating Cycle and Cash Conversion Cycle

The operating cycle generally decreases from 93 days in early 2020 to a low of around 65 days by early 2024, indicating improved overall efficiency in converting inventory and receivables into cash. There is, however, an increase again toward 80 days by mid-2025. The cash conversion cycle mirrors this pattern, moving downward from around 57 days to a low near 33 days in early 2025 before rising again modestly. Such trends suggest improved liquidity management culminating around 2024, followed by some easing of these efficiencies later.

Overall, the data reflect phases of operational efficiency improvement from 2020 through early 2022, a temporary dip in inventory and receivables management efficiency during late 2022 and early 2023, followed by recovery and generally favorable trends in liquidity and working capital management through 2024. The exceptional spike in working capital turnover in early 2025 warrants further investigation to confirm data accuracy or potential extraordinary operational events.

Cost of Revenue

The cost of revenue exhibited fluctuations over the analyzed periods. Initially, it remained relatively stable with minor variations between approximately $2.5 billion and $2.8 billion through early 2023. Starting from late 2023 into 2024 and beyond, a marked increase was observed, with costs rising sharply to values above $4.5 billion, peaking around $5.2 billion by mid-2025. This sharp increase suggests a significant expansion in operational scale or escalating production expenses during this latter period.

Inventory Levels

Inventory demonstrated a steady upward trend over the period. Starting just under $1 billion in early 2020, inventory levels grew consistently, nearly doubling by mid-2025 to over $2 billion. The growth was gradual with some slight fluctuations, indicating a sustained accumulation of stock possibly to support higher sales volume or in anticipation of increased demand.

Inventory Turnover Ratio

Inventory turnover ratio showed a general declining trend from early 2020 through late 2022, decreasing from about 10.7 down to approximately 5.8. This decline implies slower inventory movement during this timeframe, potentially reflecting longer holding periods or weaker sales efficiency. However, from late 2022 onwards, a recovery in turnover ratio is visible, increasing steadily to peak again at around 10.8 by early 2025 before experiencing a modest decline through mid-2025. This rebound indicates improved inventory management or accelerated sales activity in the most recent periods.

Combined Insights

The simultaneous rise in inventory levels alongside a period of declining inventory turnover through 2022 suggests inventory build-up with slower movement, which could have implications on working capital management. Conversely, the sharp increase in the cost of revenue starting late 2023 corresponds with the recovery of inventory turnover, which suggests a phase of heightened sales and operational activity. Overall, the data reflects a shift from a period of cautious or slower inventory usage to one of accelerated growth and increased operational throughput by 2024 and into 2025.

The analysis of the quarterly financial performance reveals several notable trends in revenue, receivables, and turnover ratios over the observed periods.

Net Revenue

The net revenue exhibits an overall strong upward trend from early 2020 through 2025. Starting at approximately $5.9 billion, the revenue increased steadily each quarter, reaching about $15.95 billion by August 2025. Noteworthy is the acceleration in growth during the 2023–2025 period, where revenue climbed rapidly from under $9 billion to nearly $16 billion, indicating enhanced market demand or successful business expansion strategies.

Trade Accounts Receivable, Net

The net trade accounts receivable generally show an increasing trajectory but with more fluctuations compared to net revenue. Initial values decreased from $3.65 billion to about $2.3 billion in late 2020, suggesting improved collections or reduced sales on credit in that interval. Subsequently, receivables rose gradually peaking at about $6.5 billion by mid-2025. The substantial jump especially post-2023 implies increased credit sales volume correlating with the rising revenue; however, it also may indicate a buildup in outstanding payments that requires monitoring for potential credit risk.

Receivables Turnover Ratio

The receivables turnover ratio experienced significant variation over the timeline. Early in 2020, the ratio improved markedly from approximately 6.2 to over 13 by late 2021, reflecting enhanced efficiency in collecting receivables relative to sales. A peak in turnover indicates faster conversion of receivables into cash. However, post-2021, this ratio declined, fluctuating between around 7.7 and 12 with a downward tendency by mid-2025 to about 9.2. This downward trend, coupled with rising receivables balances, may suggest a relative slowing in collection efforts or extended credit terms granted to customers aligned with growth initiatives.

In summary, the company demonstrates robust revenue growth accompanied by increasing receivables balances and variable collection efficiency. The early improvements in turnover ratio indicate efficient receivables management initially; however, the later decline in turnover alongside surging receivables suggests a need for closer scrutiny of credit policies and collection processes to maintain liquidity and reduce credit risk in an expanding business environment.

The company’s cost of revenue exhibits fluctuations over the periods analyzed, with notable increases and decreases. Initially, the cost of revenue remains relatively stable around the mid-2500s to high 2700s million dollars from early 2020 to early 2023, showing some quarterly variability without a clear strong trend. Starting from the first quarter of 2024, there is a significant upward shift, with values rising sharply from approximately 4586 million dollars to over 5200 million dollars by the third quarter of 2025. This suggests an increase in operational costs or scale of business activities during this later period.

Accounts payable values demonstrate considerable volatility throughout the timeline. Early periods from 2020 into 2021 show figures mainly fluctuating between 800 and 1200 million dollars, with some downward trends noticed around mid-2021. From late 2021 to early 2023, accounts payable maintain a similar range but experience short-term dips and recoveries. From the beginning of 2024 onward, accounts payable increase markedly, peaking around the 1900 million dollar mark, but showing some fluctuations thereafter, suggesting possible changes in supplier payment strategies or procurement volumes correlating with the elevated cost of revenue.

Payables turnover, which reflects the frequency of accounts payable settlements relative to cost of revenue, shows discernible variability. Throughout 2020 and most of 2021, the ratio ranges generally between 8 and 13 times, indicating relatively consistent payment cycles. Notable spikes occur, for example, in mid-2022, with a high ratio around 15, suggesting faster payments or lower payables relative to the cost of revenue during that quarter. However, from the beginning of 2024 through mid-2025, payables turnover fluctuates between approximately 8.5 and 14.9, indicating irregular payment patterns or changes in working capital management amid the rising cost structure. The high fluctuations in turnover ratio alongside increasing accounts payable and cost of revenue highlight a dynamic period for supplier financing and cash flow management in this recent timeframe.

Overall, the financial patterns reveal a steady cost base through most of the earlier years with increased operational scale or costs starting in 2024, accompanied by rising accounts payable and variable payables turnover ratios. This may reflect strategic shifts in procurement, payment policies, or market conditions influencing the company’s cost and liability management over the analyzed quarters.

The analysis of the quarterly financial data reveals several key trends in working capital, net revenue, and working capital turnover for the company over the reported periods.

Working Capital

The working capital demonstrates considerable fluctuation across the quarters. Initially, it increased from $4,370 million to a peak of $13,442 million by October 2021, indicating an expanding short-term liquidity position. Subsequently, there is a sharp decline starting early 2024, dropping significantly to a low of $80 million by February 2025. Following this trough, the working capital recovered moderately to $8,294 million by August 2025. These variations suggest cycles of capital investment and liquidity adjustments within the recent periods.

Net Revenue

Net revenue shows a consistent upward trajectory throughout the entire period. From $5,858 million in early 2020, it steadily increased each quarter, reaching $15,952 million by August 2025. This progression reflects sustained growth in sales or service income with no substantial downturns, indicating positive market demand or successful revenue management.

Working Capital Turnover

The ratio of working capital turnover exhibits volatility, with values starting at 5.19 in early 2020 and generally fluctuating between approximately 2.6 and 5.7 through late 2023. However, from early 2024 onward, there are extreme spikes, with peaks of 64.48, 681.61, and 681.61 observed in several quarters. These extraordinary values correspond to the periods of very low working capital levels, as noted earlier. The spikes indicate highly efficient use of working capital during those quarters but also reveal potential risks or operational stress due to minimal working capital buffers.

In summary, the net revenue trajectory is firmly positive, displaying continuous growth. The working capital exhibits cyclical patterns with a marked decline followed by a recovery phase in the latest quarters. Working capital turnover ratios confirm this behavior, highlighting unusually high efficiency linked to extremely low working capital in some recent quarters, which may warrant closer monitoring of liquidity risks going forward.

The inventory turnover ratio exhibits notable fluctuations over the analyzed periods. Initially, the ratio remains relatively stable around 10.7 during early 2020, followed by a decline through 2021, reaching a low point near 5.77 by late 2022. Subsequently, the ratio experiences a recovery phase, increasing steadily to approximately 10.83 by late 2024 before slightly declining again in 2025.

Correspondingly, the average inventory processing period shows an inverse trend relative to the inventory turnover ratio. Starting at 34 days in early 2020, the period lengthens progressively, peaking at around 63 days toward the end of 2022. After this peak, a consistent reduction occurs, bringing the processing period back down to approximately 34 days in early 2025, followed by a slight increase thereafter.

Inventory Turnover Ratio

Initially stable, the ratio experienced a marked decline during 2021 and 2022, indicating slower inventory movement.

A recovery phase from late 2022 into 2024 suggests improved inventory efficiency or higher sales velocity.

The slight decline in 2025 may indicate normalization or minor operational adjustments.

Average Inventory Processing Period

The processing period lengthened significantly from 2020 through 2022, reflecting slower turnover and potential accumulation of inventory.

Post-2022 periods show a notable decline in processing time, suggesting enhanced inventory management or increased demand.

The slight rise toward the latter part of the timeline might indicate moderate stabilization after prior improvements.

Overall, the data imply periods of reduced operational efficiency in inventory handling during 2021 and 2022, followed by successful initiatives or market conditions improving turnover rates and reducing holding periods in subsequent quarters. The inverse relationship between turnover ratio and processing period remains consistent with inventory management principles. Continued monitoring of these metrics will be critical for assessing future supply chain effectiveness and sales performance.

The analysis of the financial ratios related to receivables over multiple quarters reveals notable fluctuations and trends in the company's efficiency in managing its receivables.

Receivables Turnover

This ratio generally improved from early 2020 through late 2021, increasing from 6.21 to a peak of 13.25. This upward trend indicates a progressively efficient collection process during this period, as the company was able to turn over its receivables more frequently.

Following the peak, the ratio experienced volatility with some declines and increases, falling to 7.75 by mid-2024 before rising again to 11.68 by early 2025 and then tapering off to 9.23 by the third quarter of 2025. These fluctuations suggest periods of less consistency in collection efficiency, possibly influenced by external factors or operational changes.

Average Receivable Collection Period

This metric, expressed in days, exhibits an inversely proportional pattern compared to the receivables turnover, as expected. It decreased from 59 days at the start of 2020 to a low of 28 days by late 2021, signaling faster collection times and improved cash conversion cycles.

After this period, the days outstanding exhibit variability, increasing to 47 days in mid-2024, indicating slower collections during that time. Subsequently, the period shortens again to around 31 days by early 2025 before a slight increase to 40 days by the third quarter of 2025. This variability points to intermittent challenges in maintaining consistent collection speed.

Overall Interpretation

Over the analyzed period, the company demonstrated considerable improvement in managing its receivables up to late 2021, achieving more frequent turnover and shorter collection periods. However, the subsequent volatility and occasional reversals suggest that sustaining these improvements has been challenging.

The fluctuations in both ratios may reflect changes in credit policies, market conditions, customer payment behaviors, or broader economic influences. Continuous monitoring and targeted strategies may be required to stabilize and enhance receivables management performance.

The analysis of the financial ratios over the examined periods reveals several notable trends in the company's operational efficiency and working capital management.

Average Inventory Processing Period

The average inventory processing period shows an upward trend starting from 34 days in early 2020, peaking at 63 days around late 2022. Following this peak, there is a gradual decrease observed, declining to 40 days by mid-2025. This pattern suggests an increasing inventory holding duration through 2022, potentially indicating slower inventory turnover or stock accumulation, followed by improved inventory management efficiency in the subsequent periods.

Average Receivable Collection Period

The receivable collection period starts at 59 days in early 2020 with a significant downward trend, reaching its lowest point of around 28-30 days during late 2021 and early 2023. After this trough, the period fluctuates but generally remains between 30-40 days through to mid-2025. This decline points to enhanced credit and collections policies leading to faster cash inflows from receivables initially, with some variability in later periods indicating changing customer payment behavior or credit terms.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, declines from 93 days early in 2020 to a low near 65 days by early 2024, reflecting overall improved efficiency in operations and cash conversion. However, from early 2024, the cycle extends again to approximately 80 days by mid-2025, suggesting a moderation or partial reversal of previous gains in operational speed.

Overall, the data depicts a phase of rising inventory retention coupled with faster receivable collections through 2022, driving some volatility in the operating cycle. Post-2022, improvements in inventory turnover and a consistent receivables period contribute to a shortened operating cycle, enhancing liquidity and operational performance before a slight lengthening in the final periods. These trends highlight dynamic adjustments in working capital components likely reflecting strategic inventory and credit management responses to market or internal conditions.

The payables turnover ratio exhibits notable fluctuations over the analyzed periods. Initially, the ratio decreases from 10.28 to 8.33, indicating a slower rate of payables turnover. Subsequently, it increases to 12.41, suggesting an acceleration in the rate at which payables are settled. Following this peak, the ratio oscillates within a moderate range, reaching a significant high of 15.27 before settling into values around the low to mid-teens. Toward the most recent periods, the ratio again fluctuates but maintains generally higher levels relative to the earlier observations, with figures around 14.92 and 13.88, indicating improved efficiency in payables management or faster payments.

In parallel, the average payables payment period inversely mirrors the payables turnover ratio, as expected. Starting at 36 days, the payment period increases to a peak of 44 days early on, signaling longer durations in settling payables. This duration then diminishes markedly, reaching a low of 24 days concurrent with the highest observed payables turnover ratio. Periods of increased payment duration, such as 40 to 43 days, correspond with lower turnover ratios, emphasizing the inverse relationship. More recently, the payment period varies between 24 and 36 days, reflecting a general trend toward maintaining shorter payment cycles, consistent with higher turnover ratios.

The trends observed in both ratios indicate cyclical patterns in managing supplier payments, with alternating periods of faster and slower settlements. The overall movement suggests a strategic focus on optimizing cash flow and payment timeliness, especially evident in the more recent quarters where higher turnover ratios and shorter payment periods prevail. The episodic peaks and troughs imply responsiveness to operational or market conditions affecting payables management.

The analysis of the financial timing metrics reveals several notable trends over the observed periods. The average inventory processing period exhibits a general upward trend from early 2020 through late 2022, increasing from 34 days to a peak around the low 60s. Following this peak, a gradual decline is observed into 2024, ultimately returning towards the mid-to-high 30-day range by mid-2025. This pattern suggests initial growth in inventory holding time, followed by efforts or conditions leading to inventory turnover improvements in recent periods.

Regarding the average receivable collection period, there is a clear downward trend from 59 days at the start of 2020 to a low near 28 days by the end of 2021. This reduction indicates enhanced efficiency in collecting receivables during this phase. However, from early 2022 onwards, the collection period fluctuates between roughly 30 and 47 days, demonstrating some instability or variation in receivables management. Despite these fluctuations, the overall trend after the initial improvement appears less consistent.

The average payables payment period displays a more variable pattern. Initially, there is an increase from 36 days at the beginning of 2020 to a peak of 44 days in the second quarter of 2020. Subsequently, the payment period oscillates with no clear long-term trend, varying between mid-20s to high 30s and reaching another peak in early 2024. This variability may reflect changes in payment policies, supplier terms, or cash management strategies over time.

The cash conversion cycle, which integrates the inventory processing, receivables, and payables periods, reveals a complex pattern. It begins at 57 days in early 2020, decreases to around 36 days by late 2021, indicating improved overall working capital efficiency. However, from 2022 onwards, the cycle lengthens again, peaking near 69 days before declining and stabilizing near the mid-30s in 2024. The increase in 2022 is primarily driven by the rising inventory processing period and fluctuations in receivables and payables terms, implying a temporary deterioration in liquidity turnover efficiency. The subsequent reduction indicates efforts to regain control over working capital dynamics.

In summary, the data reflects an initial phase of operational improvements primarily through faster receivable collections and reduced cash conversion cycle, followed by a period of increased inventory holding times and fluctuating payment terms that extended the cash conversion cycle. The latest periods show signs of recovery and optimization efforts to manage the cash cycle more effectively, positioning the company towards improved financial efficiency.