Key Highlights
- Broadcom’s fiscal Q1 revenue reached a record $19.3 billion, representing 29% year-over-year growth
- AI-related revenue more than doubled, climbing 106% to $8.4 billion and exceeding internal projections
- Fiscal Q2 outlook calls for $22 billion in total revenue with AI segment expected to reach $14.8 billion
- Morgan Stanley analyst lifted the firm’s price target from $462 to $470 while maintaining Overweight rating
- Wall Street projects the chip giant could generate $120 billion from AI alone by fiscal year 2027
Shares of Broadcom (AVGO) surged 4.8% to close at $322.77 on March 5 following the release of its fiscal first-quarter 2026 earnings. Despite the initial pop, the stock has experienced modest declines since and continues trading below its year-to-date starting point.
The semiconductor and infrastructure software company delivered total revenue of $19.31 billion for the quarter, establishing a new company record and surpassing Wall Street’s projection of $19.18 billion. Adjusted earnings per share of $2.05 also exceeded the Street consensus of $2.03.
The headline figure came from the AI business segment — $8.4 billion in revenue representing a 106% year-over-year increase and outperforming even the company’s own internal forecasts entering the quarter.
Custom AI accelerator (ASIC) revenue posted exceptional growth of 140% year over year. AI networking sales increased 60%, with management highlighting expectations for significantly accelerated networking growth in the current quarter, powered by demand for its Tomahawk Ethernet switching platforms and SerDes technology.
Adjusted EBITDA expanded 30% year over year to reach $13.1 billion, translating to a margin of 68% of total revenue. Gross profit margins came in at 77%, representing a decline from the prior year’s 79.1% but demonstrating sequential stability.
Semiconductor Solutions Lead Performance
The semiconductor solutions division posted $12.5 billion in revenue, reflecting 52% year-over-year expansion. By contrast, non-AI semiconductor revenue managed just 4% growth — clearly illustrating where the company’s momentum originates.
Infrastructure software revenue showed modest 1% growth to $6.8 billion for the period. Within that division, VMware-related revenue expanded 13%.
During the earnings conference call, CEO Hock Tan directly addressed market speculation about whether hyperscale cloud providers and AI model developers might bypass companies like Broadcom to design proprietary silicon. His response was emphatic: “You need the best silicon design team around. You need cutting-edge SerDes, very advanced packaging. We’ve been doing this for more than 20 years. I would say we are by far way out there, and we will not see competition in customer-owned tooling for many years to come.”
CFO Kirsten Spears highlighted that Broadcom returned $10.9 billion to shareholders during the quarter — comprising $3.1 billion in dividend payments and $7.8 billion through share repurchases. The company additionally authorized a new $10 billion buyback program extending through the close of 2026.
Wall Street Analyst Upgrades Price Outlook
Morgan Stanley’s Joseph Moore increased his price objective on AVGO from $462 to $470 while reaffirming his Overweight rating on the shares. Moore characterized the quarterly performance as “strong,” emphasizing AI-driven upside momentum and enhanced visibility into long-term prospects.
The analyst observed that concerns around margin compression have diminished, networking revenue exceeded expectations, and the fiscal 2027 AI revenue trajectory remains attractive as custom ASIC design programs continue expanding.
For the current fiscal second quarter, Broadcom issued guidance calling for approximately $22 billion in total revenue, which would represent 47% year-over-year expansion. The company projects AI revenue specifically will reach $14.8 billion in Q2 — marking 76% year-over-year growth.
Management informed analysts that its five largest custom AI accelerator customers are executing well on their roadmaps, and that the company anticipates generating over $100 billion in AI semiconductor revenue during fiscal year 2027 alone. Morgan Stanley’s research team projects an even higher figure of approximately $120 billion and believes further upward estimate revisions are possible.
AVGO shares currently trade at approximately 32 times estimated fiscal 2026 earnings and roughly 22.5 times the consensus forecast for fiscal 2027.
