Key Takeaways
- Broadcom shares climbed approximately 7% in pre-market hours following a forecast of AI chip revenue exceeding $100 billion by 2027.
- First quarter fiscal 2026 revenue totaled $19.3 billion, representing a 29% year-over-year increase and surpassing consensus projections.
- The AI semiconductor division generated $8.4 billion in Q1, with expectations of $10.7 billion for the upcoming quarter.
- Second quarter revenue outlook of $22 billion significantly exceeded the Street’s $20.56 billion forecast.
- Truist maintained its Buy recommendation with a $510 target price after the earnings announcement.
Broadcom shares experienced a sharp pre-market rally of approximately 7% Thursday morning following the semiconductor manufacturer’s ambitious projection of AI chip sales exceeding $100 billion by 2027, positioning itself as a formidable competitor to Nvidia in the artificial intelligence chipmaking arena.
The Silicon Valley-based company delivered first quarter fiscal 2026 revenue totaling $19.31 billion, marking a substantial 29% year-over-year growth. This performance narrowly surpassed Wall Street’s consensus forecast of $19.26 billion, with particular strength in the semiconductor division beating estimates by 0.9%.
The AI semiconductor business posted $8.4 billion in quarterly revenue, modestly exceeding Truist’s projection of $8.2 billion. The infrastructure software division represented the only underperforming segment, falling short of consensus by 2.8%.
Earnings per share registered at $2.05, topping the unguided Street consensus of $2.03. Adjusted EBITDA reached $13.13 billion, representing 68% of total revenues — exceeding analyst projections by 2.9% and coming in 100 basis points above the company’s own guidance range.
Operating margin stood at 66.4%, running 70 basis points higher than the Wall Street consensus estimate of 65.7%.
Major AI Infrastructure Deals Drive Optimism
The company disclosed plans to supply 3 gigawatts worth of tensor processing units to Anthropic throughout 2027. Additionally, Broadcom will manufacture and deliver OpenAI’s first proprietary AI accelerator — exceeding 1 gigawatt in capacity — during the same timeframe.
These production commitments position Broadcom at a scale comparable to recent major AI chip contracts secured by industry leaders Nvidia and AMD.
Revenue guidance for the second quarter came in at $22 billion, approximately 7.3% above analyst expectations of $20.5 billion. AI semiconductor revenue for the April quarter is forecasted at $10.7 billion — running 11.5% higher than Truist’s model of $9.6 billion.
Broadcom simultaneously unveiled a new stock buyback authorization of up to $10 billion extending through year-end.
Wall Street Weighs In
Truist Securities reaffirmed its Buy rating and maintained a $510 price target following the quarterly report. The broader analyst community consensus remains at strong buy, with price targets spanning from $335 to $530.
Jefferies analysts acknowledged that AI spending concerns will continue, but noted that “Broadcom made a strong case for their AI revenue to outgrow the market.”
RBC Capital adopted a more conservative position, reducing its price target to $340 from $370 while keeping a Sector Perform rating, expressing reservations about sustained AI demand.
UBS retained its Buy rating, highlighting favorable valuation metrics within the semiconductor segment.
Notwithstanding the pre-market surge, AVGO shares remain down approximately 8.3% year-to-date. Nvidia, in contrast, has declined roughly 2% during the same timeframe.
Broadcom recently commenced shipments of what it characterizes as the industry’s inaugural 2nm custom compute processor built on its advanced 3.5D platform. The company simultaneously introduced the BroadPeak chipset, designed for emerging 5G and 6G network infrastructure, delivering up to 40% power efficiency improvements.
Inventory levels expanded by approximately 9 days quarter-over-quarter to around 60 days, exceeding the typical seasonal drawdown of about 1 day — a metric analysts are expected to monitor closely in subsequent quarters.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
