Broadcom delivered exceptional third-quarter results, beating revenue estimates with $29.6 billion compared to the expected $29.36 billion, as reported by CNBC TV18. AI chip sales more than tripled to $16.7 billion in the quarter, significantly contributing to the revenue beat. The company's adjusted profit came in at $3.32 per share, surpassing analyst estimates of $3.24. This performance demonstrates Broadcom's continued ability to capitalize on the AI infrastructure boom, with the company now expecting AI chip revenue of about $115 billion in fiscal year 2027, up from a prior forecast of over $100 billion. The company expects this growth to double to roughly $230 billion in fiscal 2028, highlighting the sustained appetite for AI infrastructure among major technology companies. Q3 revenue grew 86% year-over-year, marking the company's strongest quarter yet with record revenue, operating profit, and free cash flow. However, fourth-quarter revenue is expected to be about $34.8 billion, below analysts' average estimate of $35.03 billion, according to data compiled by LSEG.
Broadcom demonstrated exceptional financial strength with cash from operations totaling $14.2 billion for the third quarter, resulting in $13.7 billion of free cash flow, or 46% of revenue. The company's cash and cash equivalents increased to $24 billion at the end of the fiscal quarter, up from $19.6 billion at the end of the prior fiscal quarter. As per The Financial Express, this represents nearly half of every revenue dollar flowing straight through to free cash flow. CEO Hock Tan noted that demand for custom AI accelerators and networking continues to be very strong, with Q3 AI semiconductor revenue growing 221% year-over-year and 54% quarter-over-quarter. The company expects AI semiconductor revenue to accelerate to $21.7 billion in Q4, up 236% year-over-year, demonstrating sustained momentum in the AI infrastructure segment.
Broadcom shares are currently trading at $370 as of Wednesday, September 2, remaining flat ahead of the company's third-quarter earnings announcement. The stock trades above both its 50-period moving average at $363.85 and 200-period moving average at $369.10, with the 14-period RSI reading 56.40 above its moving average of 54.96. According to recent trading data, AVGO opened at $369.61, reached a high of $371.28, and closed at $370.65 on volume of 200,240 shares. The stock has spent the past two weeks consolidating in a tight trading range, with the $369 to $370 zone being the critical area to watch once Wednesday's earnings are released. However, shares were down over 1% in extended trading following the earnings announcement, recouping some earlier losses as investors scrutinize the company's AI spending returns. They have gained about 6% this year, significantly underperforming rivals and the broader semiconductor index as AI spending concerns and increased competition persist, including Marvell's recent custom chip deal with Google.
Broadcom faces increasingly bullish analyst sentiment with J.P. Morgan's Harlan Sur reiterating a Buy rating and raising his price target to $600, up from his previous $500 target. According to TipRanks.com, Sur is ranked as a top 25 analyst with an average return of 42.20% per rating. The analyst consensus now shows a Strong Buy rating with an average price target of $509.11, representing a 36.3% upside from current levels. BMO Capital also initiated coverage with a Buy rating and $455 price target, while the stock maintains 25 buy ratings, three holds, and no sells on Benzinga Pro. The company remains 23% below its record high set on June 2, though it has gained 6.1% year-to-date in 2026 and 23.7% over the last month. Barclays' analyst Blayne Curtis has an overweight rating and $540 price target, citing Broadcom's 50% exposure to the Enterprise end market which should continue improving into next year. However, Broadcom's market cap of $1.75 trillion continues to lag behind Nvidia's $5.41 trillion market cap, highlighting the competitive gap despite strong fundamentals.
Broadcom's earnings report comes after a strong double beat and impressive guidance from peer Nvidia Corporation, creating additional pressure on the company to demonstrate AI growth momentum. Freedom Capital Markets Chief Market Strategist Jay Woods notes that Broadcom tends to follow Nvidia's performance, stating that "after Nvidia forecast roughly 70% revenue growth next fiscal year it puts added pressure on Broadcom. Nvidia proved the AI party isn't over. Now Broadcom has to prove it's getting a bigger invitation." The company's AI semiconductor revenues are expected to accelerate to approximately $16 billion in Q3, representing growth of more than 200% year over year, with demand for custom XPUs and AI networking products remaining exceptionally strong. AI semiconductor bookings exceeded $30 billion in Q2 compared with $10.8 billion of shipments, and the company expects AI semiconductor revenues to double in the second half of 2026 compared with the first half, reflecting robust customer commitments and strong multi-gigawatt partnerships with leading AI developers including Google, Anthropic, OpenAI and Meta. Barclays analyst Blayne Curtis highlights that Broadcom guided Wireless up 33% QoQ and sees potential upside into January given likely content gains at Apple with WiFi 6E, touch, wireless charging, and DCM, with another potential step up in 2023 with the Apple modem.
CEO Hock Tan told analysts that Broadcom has secured enough supply to support the higher forecast for next year, while customer demand continues to mount, as reported by CNBC TV18. The company has visibility into additional AI infrastructure deployments through 2028, including more than 10 gigawatts for Anthropic, over 5 GW for OpenAI and 3 GW for Meta. "That is committed capacity, not aspiration, and it closes most of the gap to what the market wanted," said Patrick Moorhead, CEO of analyst firm Moor Insights & Strategy. This outlook highlights how AI spending is broadening beyond Nvidia's costly processors, benefiting suppliers such as Broadcom that provide both custom chips and the networking components that tie AI systems together. The company's custom AI chips are used by companies including Meta Platforms, Alphabet's Google and OpenAI, with the outlook demonstrating how AI spending is becoming more diversified across multiple suppliers in the semiconductor ecosystem. According to The Financial Express, Broadcom has agreements in place to enable more than 20 gigawatts in compute capacity for leading frontier AI labs, including Anthropic and OpenAI, through 2028, making it dependent on these two major customers for continued growth.
