Broadcom raised the stakes in the AI chip race after forecasting that artificial intelligence semiconductor revenue could reach about $115 billion in fiscal 2027 before doubling to roughly $230 billion in fiscal 2028.
The outlook came after another strong quarter for the chip and infrastructure software giant. Broadcom reported fiscal third-quarter revenue of $29.59 billion, up 86% year over year and ahead of Wall Street expectations. Adjusted earnings came in at $3.32 per share, while AI semiconductor revenue surged 221% to $16.7 billion.
Broadcom fiscal Q3 earnings
CEO Hock Tan said demand for Broadcom’s custom AI accelerators and networking products is strong. The company expects AI semiconductor revenue to accelerate to $21.7 billion in the fourth quarter, which will be a 236% year-over-year growth.
Broadcom stock falls despite AI growth
The bullish long-term outlook was not enough to trigger an immediate rally in Broadcom stock. AVGO closed Wednesday at $367.24, down 0.66% over the session, before slipping further to around $364.23 in after-hours trading.
Broadcom stock price (Source: CoinCodex)
One reason for the cautious reaction is Broadcom’s near-term outlook. The company expects fourth-quarter revenue of approximately $34.8 billion, which is slightly below the $35.03 billion average analyst estimate.
Investors are also weighing intensifying competition in custom AI silicon. Marvell recently secured a custom-chip agreement with Google, and the market continues to scrutinize whether hyperscalers can maintain their enormous AI infrastructure spending.
AI demand extends through 2028
Broadcom’s biggest advantage may be its visibility into future AI infrastructure deployments. Tan said the company sees committed capacity exceeding 10 gigawatts for Anthropic, more than 5 GW for OpenAI and 3 GW for Meta. AI chip bookings topped $30 billion during the latest quarter.
The opportunity also extends beyond chips. Broadcom’s infrastructure software revenue reached $8.75 billion, while the company generated $13.7 billion in quarterly free cash flow.
Just days before earnings, Broadcom also unveiled VMware Private AI Cloud, VMware AI Factory and AgentMinder. That gives Broadcom exposure to several layers of the AI boom rather than custom silicon alone.
For AVGO investors, the question is whether Broadcom can convert its enormous AI order pipeline into earnings fast enough to meet the expectations surrounding the stock.