Broadcom Q1: AI Revenue Doubles; Eyes $100B AI Chip Sales Next Year as Shares Surge 5%

TradingKey - On Wednesday, March 4 (ET), Broadcom (AVGO) announced its first-quarter fiscal 2026 financial results after the bell. Benefiting from a doubling of AI revenue, Broadcom's earnings and revenue for the quarter both exceeded market expectations, and the company provided strong guidance. Broadcom's shares surged as much as 5% in after-hours trading.

According to the earnings report, first-quarter AI semiconductor revenue reached $8.4 billion, a massive 106% increase year-over-year. Broadcom CEO Hock Tan stated that AI semiconductor revenue is expected to further rise to $10.7 billion in the second quarter, and AI chip sales are projected to exceed $100 billion next year.

Broadcom provided guidance that beat market expectations: second-quarter revenue is projected to be approximately $22 billion, up about 47% year-over-year, with an adjusted EBITDA margin of around 68%, flat compared to the first quarter. Additionally, the company's share repurchase authorization will reach up to $10 billion by the end of this year.

Strong Q1 AI Performance: AI Chip Revenue Targets $100B Next Year

Hock Tan stated that the doubling of AI revenue was primarily driven by the sustained growth in demand for custom AI accelerators and AI networking.

Broadcom's primary business involves transforming other companies' chip designs into physical chips, providing intellectual property and back-end technology, and handing them over to chip foundries for production. As Amazon (AMZN) , Google (GOOGL) (GOOG) , Meta (META) and Microsoft (MSFT) and others increasingly pivot to custom chips, Broadcom's role in the market has become increasingly vital.

Although Nvidia (NVDA) still maintains an absolute advantage in the AI chip market, Broadcom is catching up rapidly. Currently, Broadcom holds about a 10% share of the AI chip market; analysts expect that, driven by demand from Google's TPU, Anthropic, and others, Broadcom's share could potentially rise to around 20% in the future.

The market generally recognizes that Broadcom has six major XPU customers, with Google, Meta, Anthropic, and OpenAI having been publicly confirmed; in addition, market rumors suggest its customers also include ByteDance and Apple (AAPL) .

Hock Tan noted that custom AI deployments are entering the "next stage," and the pace is expected to accelerate. Since major customers like Anthropic and Google have collectively booked about 9GW of chip capacity, Tan expects AI chip sales to surpass $100 billion next year.

Furthermore, beyond AI chips, Broadcom's other products, such as digital signal processors, data processing units, and network switches, will continue to contribute to revenue.

Why is the Market Hesitant Despite the Growth?

However, Broadcom's stock performance has been relatively subdued this year, falling over 8% year-to-date, which may be related to various headwinds facing chip companies in recent months. Since the end of 2025, shortages of High Bandwidth Memory (HBM) required for custom accelerators, rising storage costs, and capacity constraints in the most advanced stages of chip manufacturing and packaging have all hindered Broadcom's further growth.

Some analysts also believe that the lackluster performance of Broadcom's stock is tied to uncertainties regarding the future capital expenditures of its major downstream customers.

Since the start of 2026, major tech giants, especially cloud service providers, have almost all raised their capital expenditure forecasts. The consensus expectation for Google's 2026 capital expenditure has been revised upward by 117% compared to a year ago, Meta by 96%, Amazon by 75%, and Oracle (ORCL) by as much as 264%.

However, given the massive scale of this year's capital expenditure forecasts, the market believes such capital intensity is unsustainable. The growth rate of tech giants' capital expenditures may pull back significantly in 2027, which could hit Broadcom's revenue at its source and potentially end its high-growth cycle.

A more optimistic view holds that while massive capital expenditures may be unsustainable in the long run, for Broadcom, 2027 is far from the end of the recent boom. As of the end of 2025, Broadcom's backlog for AI-related products exceeded $73 billion, primarily covering delivery requirements for the next 18 months.

According to the latest earnings report, Anthropic has confirmed custom chip orders totaling $21 billion, with a delivery window from late 2026 to 2027. OpenAI has been confirmed as Broadcom's sixth custom AI chip customer and is expected to start contributing significant revenue in 2027. Furthermore, volumes for Google's TPU and Meta's chips continue to ramp up. All of these provide a solid demand foundation for Broadcom's target of $100 billion in AI chip sales by 2027.