Broadcom delivered another quarter of explosive artificial-intelligence growth, with revenue nearly doubling from a year ago and AI semiconductor sales more than tripling. Yet investors responded cautiously Thursday as a slightly weaker-than-expected fourth-quarter revenue forecast overshadowed some of the strongest long-term AI guidance the chipmaker has issued.
For its fiscal third quarter ended August 2, Broadcom reported adjusted earnings of $3.32 per share, up 96% from $1.69 a year earlier and above the $3.22 Zacks consensus estimate. Revenue surged 86% to $29.59 billion from $15.95 billion, topping the roughly $29.47 billion consensus forecast.
GAAP results were also substantially stronger. Net income reached $13.09 billion, or $2.68 per diluted share, compared with $4.14 billion, or $0.85 per share, in the same quarter last year. GAAP operating income rose 171% to nearly $16 billion.
The centerpiece of the report was Broadcom’s AI semiconductor business.
AI semiconductor revenue climbed 221% year over year to $16.7 billion and jumped 54% from the previous quarter. AI chips alone accounted for roughly 56% of Broadcom’s total quarterly revenue, up from 49% in the second quarter.
CEO Hock Tan said demand for the company’s custom AI accelerators and networking products remained exceptionally strong.
Broadcom’s XPU shipments increased by more than 3.5 times from a year earlier and accounted for 73% of AI semiconductor revenue. AI networking revenue increased by more than 2.5 times.
That mix provides an important distinction between Broadcom and Nvidia. Broadcom is increasingly benefiting from large technology companies developing custom processors optimized for their own AI workloads rather than relying exclusively on general-purpose graphics processors. Broadcom helps design those accelerators while also supplying networking technology that connects large clusters of chips inside AI data centers.
Reuters has identified major customers and partners in Broadcom’s AI ecosystem including Google, Meta, OpenAI and Anthropic. The continued buildout of custom chips among hyperscalers gives Broadcom another path to capture AI infrastructure spending even as Nvidia remains dominant in the broader accelerator market.
Broadcom Raises 2026 AI Forecast to $58 Billion
Management raised its fiscal 2026 AI semiconductor revenue forecast to approximately $58 billion, up from its previous expectation of $56 billion.
That would represent roughly 186% growth from fiscal 2025.
The longer-term projections were even more aggressive.
Broadcom now expects approximately $115 billion in AI semiconductor revenue during fiscal 2027, up from its previous forecast of more than $100 billion. Management believes AI revenue could then double again to about $230 billion in fiscal 2028.
Tan said Broadcom has secured enough supply to support the $115 billion fiscal 2027 forecast and that actual customer demand currently exceeds that projection.
For fiscal 2028, management said it also has visibility into enough demand and supply to support approximately $230 billion of AI semiconductor revenue.
Broadcom expects fiscal 2026 AI semiconductor revenue of roughly $58 billion, meaning its $115 billion fiscal 2027 forecast implies nearly another doubling in just one year. Reaching $230 billion the following year would represent another doubling on top of an already dramatically larger revenue base.
The projections remain forecasts rather than guaranteed revenue. AI data-center construction depends on several factors outside Broadcom’s direct control, including customer capital spending, power availability, data-center readiness and supplies of advanced silicon, memory, packaging and substrates.
Management nevertheless said demand for AI compute remains stronger than available supply.
Broadcom is also maintaining an ambitious profitability goal. Tan said the company remains on track to exceed $30 in annual earnings per share in fiscal 2028 if the expected AI expansion develops as planned.
Q4 Guidance Explains Why Broadcom Stock Fell
The disconnect between Broadcom’s long-term AI outlook and its near-term forecast helps explain the stock’s reaction.
Broadcom expects fiscal fourth-quarter revenue of approximately $34.8 billion, representing growth of about 93% from a year earlier.
Wall Street was looking for roughly $35.03 billion, according to LSEG data cited by Reuters.
The shortfall is relatively small—about $230 million—but Broadcom entered the report with exceptionally high expectations after the rapid expansion of its AI business.
AVGO shares fell around 3% during Thursday’s session even as the broader technology sector rallied. The stock had closed Wednesday at $367.24 before the post-earnings reaction.
The decline illustrates the increasingly high bar facing leading AI companies. Strong current results are no longer necessarily enough to push shares higher when valuations already incorporate substantial future growth. Investors are paying particularly close attention to whether forward guidance exceeds expectations rather than merely meeting them.
AI Revenue Expected to Reach $21.7 Billion Next Quarter
Broadcom expects the AI business to accelerate again during the fourth quarter.
Management forecast approximately $21.7 billion of AI semiconductor revenue, up 236% from the same period last year.
That would represent another roughly 30% sequential increase from the $16.7 billion generated in the third quarter.
Total semiconductor revenue is expected to reach approximately $26.1 billion, including roughly $4.3 billion from Broadcom’s non-AI semiconductor operations.
The traditional semiconductor business has been far less explosive. Non-AI semiconductor revenue totaled approximately $4.2 billion during the third quarter, up 5% year over year and essentially unchanged sequentially.
Broadband and server-storage products grew during the quarter, partially offset by weaker wireless demand.
That makes the changing composition of Broadcom increasingly clear. AI accounted for the vast majority of semiconductor growth and has quickly become the company’s most important incremental revenue driver.
Semiconductor Solutions revenue overall reached $20.84 billion during Q3, up 127% from $9.17 billion a year earlier and representing 70% of Broadcom’s total revenue.
VMware Continues Growing Alongside the Chip Business
Broadcom’s infrastructure software operation provides a second major earnings engine.
Infrastructure software revenue increased 29% year over year to approximately $8.75 billion, accounting for 30% of company revenue.
Management said annual recurring revenue within the software business grew 15%.
The segment has become especially important since Broadcom’s acquisition of VMware, giving the company a large enterprise-software platform alongside its semiconductor operations.
Broadcom recently expanded that strategy through VMware Private AI Cloud and VMware AI Factory, products aimed at companies that want to build and operate AI workloads inside controlled private-cloud environments rather than relying entirely on public-cloud infrastructure.
Management believes enterprise adoption of AI could create an additional opportunity for VMware by encouraging customers to run models, agents and data-sensitive applications within their own infrastructure.
Infrastructure software revenue is expected to remain around $8.7 billion during the fourth quarter.
The software operation is also highly profitable. Its non-GAAP operating margin was approximately 84% during Q3, up about 650 basis points from a year earlier.
Margins Show Broadcom’s AI Trade-Off
Broadcom’s enormous AI growth is producing considerable operating leverage, but the shift toward custom accelerators also affects gross margins.
Companywide non-GAAP gross margin was approximately 75% during the third quarter, down 210 basis points sequentially as AI semiconductor revenue became a larger portion of Broadcom’s sales.
That still came in better than management’s previous expectation of roughly 74%.
Despite the gross-margin pressure, adjusted operating income climbed 92% from a year earlier to $20.1 billion. The non-GAAP operating margin reached approximately 67.9%, up about 240 basis points year over year.
Broadcom expects its fourth-quarter non-GAAP operating margin to remain around 66%, while gross margin is expected to move toward approximately 73% as custom XPUs with higher memory content become an even larger part of the product mix.
Investors therefore have two margin trends to follow. AI is lowering the company’s gross-margin percentage because of the product mix, but Broadcom’s scale is simultaneously allowing operating profit to grow much faster than expenses.
Free Cash Flow Reaches Record $13.7 Billion
Broadcom’s AI expansion is also translating into substantial cash generation.
Operating cash flow reached $14.2 billion during the quarter, nearly doubling from $7.17 billion a year earlier. After approximately $532 million of capital expenditures, Broadcom generated $13.67 billion in free cash flow, up 95% year over year.
Free cash flow represented approximately 46% of quarterly revenue.
Broadcom finished the quarter with $24 billion in cash and cash equivalents, up from $19.6 billion at the end of the previous quarter.
The board maintained a quarterly dividend of $0.65 per share, payable September 30 to shareholders of record as of September 21. Broadcom paid approximately $3.1 billion in dividends during the third quarter.
What Investors Should Watch Next
Broadcom’s next quarter will test whether its extraordinary AI projections can continue translating into reported revenue quickly enough to satisfy increasingly aggressive market expectations.
The most immediate number is $21.7 billion. That is Broadcom’s Q4 AI semiconductor revenue target, and reaching it would mark another substantial sequential acceleration from Q3.
Beyond that, investors will be watching whether Broadcom continues securing enough advanced-chip, memory and packaging capacity to support the company’s planned jump from approximately $58 billion of AI revenue this year to $115 billion next year.
Customer concentration is another factor. Broadcom’s custom accelerator strategy involves a relatively small number of extremely large technology customers, which allows individual programs to generate enormous revenue but can also make design wins, deployment schedules and customer capital-spending decisions unusually important.
Competition is increasing as well. Marvell recently secured additional custom AI chip business with Google, adding another point of scrutiny around how much of the expanding custom-accelerator market Broadcom can retain. Nvidia remains the dominant supplier of general-purpose AI accelerators, while hyperscalers are increasingly pursuing internally designed chips to diversify their infrastructure.
For Broadcom, the Q3 numbers show little evidence that AI demand itself is weakening. AI semiconductor revenue more than tripled, the 2026 forecast increased, and management laid out a path toward $115 billion in AI sales next year and $230 billion in 2028.
The question after Thursday’s stock decline is different: with expectations already so high, Broadcom may increasingly need to outperform those extraordinary forecasts—not simply achieve them—to generate the same enthusiasm from investors that its AI growth once did.