Broadcom Inc.

NASDAQ Global Select
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Bullish +75

Broadcom stock: Why the AI chipmaker’s growth story is gaining steam

AI-generated analysis

📈 Broadcom's AI semiconductor revenue surged 221% year over year in the fiscal third quarter ended August 2.

🚀 The company raised its long-term outlook, projecting AI revenue to reach $115 billion in FY27 and $230 billion in FY28.

🤝 Broadcom is mass shipping Ironwood TPU v7 chips and supplying Alphabet's next-gen TPU v8i inference chips.

⚡ Anthropic is expected to become Broadcom's largest customer next fiscal year with 5 gigawatts of TPU v8i capacity in FY27.

📊 Overall revenue reached $29.6 billion in the third quarter, up 86% from a year earlier.

💰 Adjusted earnings per share increased 96% to $3.32, exceeding analyst expectations of $3.24.

🔮 For the fiscal fourth quarter, Broadcom expects revenue to reach $34.8 billion with 93% year-over-year growth.

📉 Non-AI semiconductor revenue increased only 5% to $4.2 billion while AI demand outpaces supply.

💡 Analysts view current market skepticism as excessive given the scale of planned AI deployments and partnerships.

⚠️ The company faces the key risk that AI chip supply fails to ramp fast enough, potentially crushing its FY27–FY28 growth plan.

Bullish Signals
  • Broadcom's AI semiconductor revenue surged 221% year over year in the fiscal third quarter ended August 2.
  • The company raised its long-term outlook, projecting AI revenue to reach $115 billion in FY27 and $230 billion in FY28.
  • Adjusted earnings per share increased 96% to $3.32, exceeding analyst expectations of $3.24.
  • Overall revenue reached $29.6 billion in the third quarter, up 86% from a year earlier.
  • For the fiscal fourth quarter, Broadcom expects revenue to reach $34.8 billion with 93% year-over-year growth.
  • Anthropic is expected to become Broadcom's largest customer next fiscal year with 5 gigawatts of TPU v8i capacity in FY27.
  • OpenAI is projected to become Broadcom's second-largest chip customer with 5 gigawatts of Jalapeño chips deployed in 2028.
  • Meta Platforms is expected to receive 3 gigawatts of custom MTIA chips through 2028.
  • Analysts describe current market skepticism as excessive given the scale of planned AI deployments and expanding partnerships.
  • The company brought the v8i product to market faster than MediaTek despite starting later.
Risk Factors
  • Non-AI semiconductor revenue increased only 5% to $4.2 billion, indicating slower growth in that segment compared to AI.
  • Broadcom's overall gross margin declined 210 basis points to 75%, partly reflecting the larger contribution from lower-margin semiconductor revenue.
  • The company faces the key risk that AI chip supply fails to ramp fast enough, potentially forcing customers to delay deployments and crushing its FY27–FY28 growth plan.
  • For the fiscal fourth quarter, gross margin is expected to be 73%, lower than the current 75%.
  • Broadcom shares have faced market skepticism regarding valuation despite strong AI growth outlook.
Full Analysis
Broadcom (AVGO) is experiencing significant growth driven by its artificial intelligence semiconductor business, which surged 221% year over year in the fiscal third quarter ended August 2. The company has begun mass shipments of its Ironwood TPU v7 chips and is now shipping Alphabet's next-generation TPU v8i inference chips, positioning itself as a key supplier for major AI infrastructure clients. Management has substantially raised its long-term revenue outlook, projecting AI revenue to reach $115 billion in fiscal 2027 and $230 billion in fiscal 2028. This growth is supported by expanding partnerships with Alphabet, Anthropic, OpenAI, and Meta, with specific gigawatt-scale capacity deployments planned for these customers through 2028. Financially, Broadcom reported overall revenue of $29.6 billion in the third quarter, up 86% from a year earlier, with adjusted earnings per share increasing 96% to $3.32, beating analyst expectations. While non-AI semiconductor revenue growth slowed to 5%, infrastructure software revenue climbed 29%. The company expects fiscal fourth-quarter revenue to reach $34.8 billion, representing 93% year-over-year growth. Despite the strong fundamentals and raised guidance, Broadcom shares have faced market skepticism regarding valuation and supply constraints. Analysts note that while demand for fiscal 2027 AI revenue already exceeds projections, the company must successfully ramp up chip supply to meet its ambitious growth plans without compromising profitability.