Key Takeaways
- First-quarter revenue reached $19.3 billion, marking a 29% increase from the prior year and setting a company record
- Artificial intelligence segment revenue doubled, climbing 106% to reach $8.4 billion
- Second-quarter outlook calls for $22 billion in total revenue with AI sales projected at $14.8 billion
- Morgan Stanley increased its price target from $462 to $470 while maintaining an Overweight rating
- Wall Street analysts believe Broadcom’s AI chip business could generate $120 billion in fiscal 2027
Shares of Broadcom (AVGO) surged 4.8% to finish at $322.77 on March 5, following the semiconductor giant’s release of first-quarter fiscal 2026 earnings results. The stock has experienced modest declines since that session and continues trading below its year-to-date starting point.
The company delivered total revenue of $19.31 billion, establishing a new quarterly record while exceeding Wall Street’s projection of $19.18 billion. Adjusted earnings per share came to $2.05, surpassing the analyst consensus estimate of $2.03.
The artificial intelligence business segment produced the most impressive results — generating $8.4 billion in revenue, representing 106% growth versus the year-ago period and outperforming the company’s own internal projections.
Custom AI ASIC chips drove much of this performance with 140% revenue expansion. The networking division tied to AI applications grew 60%, with management indicating that networking revenue should experience meaningful acceleration during the second quarter, powered by demand for its Tomahawk Ethernet switching technology and SerDes components.
Adjusted EBITDA increased 30% from the prior year to $13.1 billion, producing margins of 68% relative to revenue. Gross profit margins settled at 77%, representing a decline from 79.1% twelve months earlier but remaining relatively stable.
Semiconductor Division Performance
The semiconductor solutions division posted 52% year-over-year revenue growth to $12.5 billion. However, chip sales outside the AI category expanded just 4% — highlighting where the company’s growth engine truly lies.
Infrastructure software revenue grew modestly by 1% to $6.8 billion. VMware-related revenue within this division increased 13%.
Chief Executive Hock Tan directly addressed questions during the earnings conference call about whether major language model developers might bypass chip suppliers like Broadcom to develop proprietary silicon. His answer was emphatic: “You need the best silicon design team around. You need cutting-edge SerDes, very advanced packaging. We’ve been doing this for more than 20 years. I would say we are by far way out there, and we will not see competition in customer-owned tooling for many years to come.”
Chief Financial Officer Kirsten Spears highlighted that the company distributed $10.9 billion to shareholders during the first quarter — consisting of $3.1 billion in dividend payments and $7.8 billion through stock repurchases. Management also unveiled a new $10 billion buyback authorization running through the conclusion of 2026.
Wall Street Analyst Increases Target
Morgan Stanley’s Joseph Moore lifted his price objective on AVGO from $462 to $470 while reaffirming an Overweight rating. Moore characterized the quarterly performance as “strong,” highlighting AI-related upside potential and enhanced long-term business visibility.
He observed that profitability margin worries have diminished, networking exceeded expectations, and the fiscal 2027 AI opportunity remains attractive as custom ASIC contracts continue expanding.
Broadcom provided second-quarter revenue guidance of approximately $22 billion, suggesting 47% growth compared to the same period last year. Artificial intelligence revenue for the upcoming quarter is projected at $14.8 billion — representing 76% year-over-year expansion.
Management has communicated to analysts that its five largest custom AI chip clients are making solid progress, and that the company can produce over $100 billion in AI chip revenue during fiscal 2027 alone. The Morgan Stanley research team projects an even larger figure of approximately $120 billion, and believes there’s potential for additional upward estimate revisions.
AVGO shares currently trade at approximately 32 times fiscal 2026 earnings projections and roughly 22.5 times the fiscal 2027 consensus estimate.
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