Half of It Goes Through DistributorsNarrow moat

Broadcom (AVGO) — moat facet

Forty-eight percent of revenue reaches Broadcom through partners with no minimum purchase obligation — a demand signal with a lag built into it.

Sales to distributors accounted for 48% of Broadcom's net revenue in fiscal 2025, unchanged from 20241, and 56% in the first nine months of fiscal 20262. Distributors and OEMs or their contract manufacturers together account for what the company calls the substantial majority of semiconductor sales. For a company whose reputation rests on deep, direct, multi-year design relationships, roughly half the money arrives second-hand.

Sales through distributors, share of net revenue (%)28%FY1734%FY1846%FY1942%FY2053%FY2156%FY2257%FY2348%FY2448%FY2556%9M FY26Broadcom Forms 10-K FY2018-FY2025; Q3 FY2026 10-Q (nine months)
The channel's share doubled over the decade, dipped to 48% in the VMware years, and is back to 56%.

The risks Broadcom itself lists are the ones that matter: demand fluctuates with distributors' own inventory levels rather than with end demand, and channel partners are generally not subject to minimum purchase commitments3. That is a description of a demand signal with a lag in it. In a cycle as steep as the current AI build-out, inventory built in anticipation and inventory consumed are very different quantities, and the supplier learns which it had only when the correction arrives.

There is a compensating point, and it is genuine. The design win happens with the end customer, not the distributor; the channel handles logistics and credit for relationships Broadcom has already secured in engineering terms. A distributor cannot switch a socket to a rival part.

Watch inventory and days-sales-outstanding alongside revenue. Channel businesses hide the turn: revenue keeps printing while sell-through weakens, and the adjustment arrives all at once rather than gradually.

Moat trajectory: Holding steady

Forty-eight percent through distributors in both fiscal 2025 and 2024. The channel is neither growing nor shrinking as a share of the business, which means the visibility problem is constant rather than worsening. It matters most at a cycle turn, and the cycle has not turned.

The number that tests this moat
Reported
Share of net revenue sold through distributors
56% in the first nine months of FY2026, from 48% in FY2025

Rising with the AI business, which passes through a distributor. Demand signals through the channel lag end demand, so a rising share raises the risk of an inventory correction found late.

Source: Broadcom Form 10-Q, quarter ended 2 August 2026 ↗
References
  1. ReportedSales to distributors accounted for 48% of Broadcom's net revenue in fiscal 2025, unchanged from 2024, and 56% in the first nine months of fiscal 2026.
    Broadcom Form 10-K, FY2025 — Significant Customer Information: during fiscal years 2025, 2024 and 2023 one customer accounted for 32%, 28% and 21% of net revenue respectively, with that revenue included in the semiconductor solutions segment; one customer accounted for 44% and 18% of net accounts receivable as of November 2, 2025 and November 3, 2024; sales to distributors accounted for 48% of net revenue in each of fiscal 2025 and 2024; aggregate sales through all channels to the top five end customers were approximately 40% of net revenue in each of fiscal 2025 and 2024; the company expects to continue to experience significant customer concentration — FY2025 (ended November 2, 2025) · publ. December 18, 2025 · source ↗
  2. ReportedSales to distributors accounted for 48% of Broadcom's net revenue in fiscal 2025, unchanged from 2024, and 56% in the first nine months of fiscal 2026.
    Broadcom Inc., Form 10-Q for the quarter ended 2 August 2026 - remaining performance obligations approximately $179.2 billion, including a long-term contract for custom AI accelerators entered in the quarter ended 3 May 2026, about 25% expected within 12 months; one semiconductor customer, a distributor, 50% of net revenue in the quarter (32% a year earlier) and top five end customers about 55%; distributors 56% of net revenue for three quarters; purchase commitments $126,821M ($52,674M for fiscal 2027, $72,952M for fiscal 2028); operating income $15,955M (54% of revenue) against $5,887M (37%); infrastructure software revenue $8,752M (+29%) and operating income $7,325M (+40%), attributed to VMware Cloud Foundation including additional license revenue; subscriptions and services revenue $5,312M against $4,779M, products $24,279M against $11,173M — Quarter ended 2 August 2026 · publ. 2026-09-10 · source ↗
  3. ReportedThe risks Broadcom itself lists are the ones that matter: demand fluctuates with distributors' own inventory levels rather than with end demand, and channel partners are generally not subject to minimum purchase commitments.
    Broadcom Form 10-K, FY2025 — risk factors on distributors and channel partners: demand fluctuates with distributors' product inventory levels and the timing of delivery to end customers; distributors and other channel partners are generally not subject to minimum purchase commitments; customer contracts typically contain warranty and indemnification provisions and in certain cases liquidated damages, and in some agreements with the largest customers the associated liabilities are potentially unlimited and may greatly exceed the revenue received from the relevant products — FY2025 · publ. December 18, 2025 · source ↗
Sources
Generated September 22, 2026