Key Takeaways
- Broadcom’s AI revenue rose 106% year over year to $8.4 billion, exceeding expectations.
- Overall revenue for Q1 increased 29% to $19.31 billion, with adjusted EPS of $2.05.
- The company forecasts a significant revenue boost in Q2, projecting a 76% increase in AI revenue to $14.8 billion.
Broadcom Sees Strong Growth in AI Revenue
Broadcom reported impressive fiscal Q1 results for 2026, showcasing a strong performance in its artificial intelligence (AI) revenue segment. The company’s total AI revenue soared 106% year over year to reach $8.4 billion, driven by robust sales in both networking and custom AI chip businesses. Notably, revenue from custom AI ASICs (application-specific integrated circuits) surged 140%, while AI networking revenue climbed by 60%. Broadcom anticipates continued momentum in Q2, forecasting a further 76% increase in AI revenue to $14.8 billion.
The five largest custom AI chip customers are on track to contribute significantly, with the potential to generate over $100 billion in AI chip revenue by fiscal 2027. In terms of overall revenue, Broadcom achieved $19.31 billion in Q1, up 29% from the previous year, while adjusted earnings per share increased by 28% to $2.05, surpassing analyst expectations.
Despite challenges in non-AI chip revenue growth, which only improved by 4%, total semiconductor solutions revenue rose 52% to $12.5 billion. Infrastructure software revenue experienced a modest increase of 1%, primarily due to a 13% growth in VMware revenue. Broadcom reported a gross margin of 77%, slightly down from 79.1% a year earlier.
Looking ahead, Broadcom projects fiscal Q2 revenue to grow by 47%, reaching $22 billion. It expects semiconductor revenues to grow 76% to $14.8 billion, while infrastructure software revenue is forecasted to rise by 9% to $7.2 billion. Additionally, the company announced a $10 billion share repurchase program set to continue through the end of 2026.
Broadcom’s stock presents a compelling case for investors, given the surging demand for custom AI ASICs and networking components. The anticipated $100 billion AI chip revenue by fiscal 2027 underscores the company’s strong growth potential in the AI infrastructure sector. Currently, the stock trades at a forward price-to-earnings (P/E) ratio of approximately 32 times fiscal estimates for the year, dropping to about 22.5 times the fiscal 2027 consensus, making it a potentially attractive buy as growth rates accelerate.
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