Broadcom Inc.

AVGO · NASDAQ · USD

Analysis

Last 4 earnings calls · through Q3 FY2026

Broadcom has turned itself into the contract chipmaker for the frontier AI labs, and it now says AI chip revenue roughly doubles in each of the next two years. The catch is whether those labs get the power and buildings to switch the chips on. How much of the 2028 AI target rests on just two labs?

  • Custom AI chips now decide how Broadcom does.

    AI semiconductor revenue rose every quarter, and management raised its fiscal 2026 outlook to $58 billion on demand Hock Tan calls 'insatiable'. Six frontier labs are the customers, so the whole company moves with their build-outs.

  • Networking rides along with every accelerator sold.

    AI networking reached 40% of AI revenue, and its Tomahawk 6 is the only 100-terabit switch shipping. Management expects networking to grow as fast as the chips themselves, which makes each customer harder to leave. What share of AI revenue will networking be in 2027?

  • Broadcom is helping to pay for its customers' chips.

    It set up a financing vehicle with Apollo and Blackstone so Anthropic and OpenAI can buy its chips, and may cover part of the equipment's value if they cannot pay. Customer risk now sits partly on Broadcom's own books. How large are Broadcom's guarantees on the Anthropic and OpenAI deals?

Bullish
  • Custom accelerator demand
    The bull case is that frontier model developers buy custom accelerators from Broadcom because they run their own workloads at lower cost and power than general-purpose GPUs.
  • Multi-year AI outlook
    Management has gone from declining to forecast AI revenue to publishing multi-year targets that it says are backed by secured wafer, memory and substrate supply.
  • Software cash flow
    VMware and the rest of the software segment generate high-margin recurring revenue that funds the dividend, buybacks and new capacity while AI revenue scales.
Bearish
  • Customer concentration
    The bear case is that a handful of frontier labs account for essentially all AI revenue, and two of them need outside financing to pay for the compute they have ordered.
  • Data center build constraints
    Even where demand exists, shipments depend on land, power and building shells that Broadcom does not control, so guidance rests on customers' construction schedules.
  • Margin mix and dilution
    Gross margin falls as accelerators carrying purchased memory become a larger part of revenue, and a larger share count means profit per share trails total profit growth.
See the full bull & bear case
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Donald Trump
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Purchase≥$250KJul 31Sep 22
Donald Trump
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Sale≥$1KJul 17Sep 22

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Product segmentsGeography
FY2025 · USD

How Broadcom turned $63.9B of revenue into $25.5B of operating income.

Revenue
Semiconductor Solutions$36.9B▲ 22.47% YoY
Infrastructure Software$27.0B▲ 25.85% YoY
Total revenue$63.9B
Gross profit$43.3B67.8%
Operating income$25.5B39.9%
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