Broadcom Q1 Earnings: AI Revenue Doubles to Top $10 Billion for First Time, Bets on $100 Billion AI Chip Revenue Next Year, Shares Rise 5% After Hours; Has Nvidia Met Its Match?

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

The report showed that AI semiconductor revenue reached $8.4 billion in the first quarter, a massive 106% increase year-over-year, with quarterly AI revenue set to exceed $10 billion for the first time. Broadcom CEO Hock Tan stated that AI semiconductor revenue is expected to rise further to $10.7 billion in the second quarter, and AI chip sales are projected to surpass $100 billion next year.

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

Q1 AI Revenue Is Robust! AI Chip Revenue Targets $100 Billion Next Year

Hock Tan noted 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 translating 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 critical.

Although NVIDIA (NVDA) still maintains an absolute dominance 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 Broadcom as having six major XPU customers; Google, Meta, Anthropic, and OpenAI have been publicly confirmed, while market rumors suggest its client list also includes ByteDance and Apple (AAPL) .

Hock Tan stated that custom AI deployments are entering a "next stage" and are expected to accelerate. Given that major customers like Anthropic and Google have collectively booked approximately 9GW of chip capacity, Tan anticipates that AI chip sales will exceed $100 billion next year.

Furthermore, in addition to 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 Skeptical of Broadcom as Its Stock Price Falls This Year?

However, Broadcom's stock performance has been relatively subdued this year, down over 8% year-to-date. This may be related to various headwinds facing chip companies in recent months. Since late 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 Broadcom's lackluster stock performance is tied to uncertainties regarding the future capital expenditures of its major downstream customers.

Since 2026, major tech giants, particularly cloud service providers, have almost all raised their capital expenditure forecasts. Consensus expectations for Google's 2026 capital expenditure have been revised upward by 117% compared to a year ago, while Meta's is up 96%, Amazon's up 75%, and Oracle's (ORCL) has been raised by as much as 264%.

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

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

According to the latest financial report, Anthropic has confirmed custom chip orders totaling $21 billion, with a delivery window spanning from late 2026 to 2027. OpenAI has been confirmed as Broadcom's sixth custom AI chip customer and will begin contributing significantly to revenue in 2027. Additionally, Google's TPU and Meta's chips continue to ramp up. These factors provide a solid demand foundation for Broadcom's $100 billion AI chip sales target for 2027.