Broadcom Surpasses Expectations with Strong AI Forecast, Yet Shares Remain Under Pressure

Broadcom reported a strong fiscal third‑quarter performance, beating earnings expectations and raising its long‑term revenue outlook for the artificial‑intelligence custom‑chip segment. Revenue for the quarter ended August 2, 2026, rose 85% year‑over‑year to $29.59 billion, slightly above the $29.36 billion consensus, while adjusted earnings per share climbed 96% to $3.32, surpassing the $3.24 consensus. Although the stock slipped modestly in extended‑hours trading, it remains up about 6% year‑to‑date.

CEO Hock Tan highlighted a robust AI revenue trajectory: the company projects $21.7 billion in AI‑related revenue for the upcoming fiscal fourth quarter and $58 billion for fiscal 2026, an increase from its prior $56 billion estimate. Guidance for fiscal 2027 was raised to $115 billion, and the outlook for 2028 stands at $230 billion, doubling the 2027 figure and exceeding the FactSet consensus of $177 billion. Tan also expects adjusted EPS to exceed $30 in 2028, above the consensus of $26.38.

These projections incorporate supply constraints, including land, power, and data‑center capacity, as well as partnerships with Alphabet (Google), Anthropic, OpenAI, and Meta Platforms. Tan emphasized the strength of Broadcom’s IP portfolio, advanced packaging, high‑bandwidth memory, and SRAM integration, noting the fastest time‑to‑market for TPUs co‑designed with Google. He said Anthropic is expected to become the largest customer of Broadcom’s XPU chips, with a pipeline of 5 GW now and an additional 10 GW on the horizon. OpenAI is slated to receive 1.3 GW in the coming year, with a roadmap to 5 GW of new Jalapeno processors and next‑generation XPUs. To support these deployments, Broadcom has created a special‑purpose vehicle with Apollo and Blackstone to enable more than 20 GW of compute infrastructure by the end of 2028. Similar financing arrangements have been used by Nvidia and are planned for Meta’s upcoming training and inference accelerators, which aim for 3 GW of deployment by 2028.

In the Semiconductor Solutions segment, revenue rose 70% year‑over‑year to $20.84 billion, beating the $20.29 billion consensus, driven by a 221% increase in AI‑related semiconductor sales, which reached $16.7 billion. The Infrastructure Software segment grew 29% to $8.75 billion, slightly missing the $8.82 billion FactSet estimate. For the fourth quarter, Broadcom projects total revenue of about $34.8 billion, below the $35.03 billion consensus, largely due to software timing, while AI semiconductor revenue is expected to accelerate to $21.7 billion, a 236% YoY increase. Adjusted operating margin is forecast at 66%, implying $22.97 billion of operating income, modestly below consensus expectations. Higher memory content is cited as a factor limiting margin expansion.

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