Key Takeaways
- Broadcom shares climbed approximately 7% in pre-market trading following a projection of AI chip revenue exceeding $100 billion by 2027.
- Fiscal Q1 2026 revenue totaled $19.3 billion, representing a 29% year-over-year increase that surpassed Wall Street expectations.
- The company’s AI semiconductor division generated $8.4 billion in Q1, with forecasts calling for $10.7 billion in Q2.
- Management issued Q2 revenue guidance of $22 billion, significantly exceeding the analyst consensus of $20.56 billion.
- Truist maintained its Buy recommendation with a $510 price objective after the earnings release.
Broadcom shares experienced a dramatic pre-market rally of approximately 7% Thursday following the semiconductor company’s ambitious forecast calling for AI chip sales to exceed $100 billion in 2027, positioning itself as a formidable competitor to Nvidia’s market leadership.
The technology giant delivered fiscal first quarter 2026 revenue of $19.31 billion, marking a robust 29% year-over-year expansion. This performance narrowly surpassed the Street consensus forecast of $19.26 billion, with particularly strong results from the semiconductor division which exceeded expectations by 0.9%.
The AI semiconductor business generated $8.4 billion in quarterly revenue, marginally topping Truist’s projection of $8.2 billion. The software division represented the quarter’s weaker performance area, falling short of consensus by 2.8%.
Adjusted earnings per share reached $2.05, exceeding the unguided Street estimate of $2.03. The company posted EBITDA of $13.13 billion, representing 68% of total revenues — coming in 2.9% above analyst projections and 100 basis points higher than Broadcom’s internal guidance.
Operating margin registered at 66.4%, landing 70 basis points above the consensus forecast of 65.7%.
Major AI Customer Commitments Announced
The chipmaker revealed plans to supply 3 gigawatts of tensor processing units to Anthropic during 2027. Additionally, Broadcom will manufacture and ship OpenAI’s inaugural custom AI chip — exceeding 1 gigawatt — within the same timeframe.
These production volumes place Broadcom in competitive territory with recent AI chip contracts secured by Nvidia and AMD.
For the second quarter, Broadcom provided revenue guidance of $22 billion, approximately 7.3% above Wall Street’s $20.5 billion estimate. AI chip revenue specifically is projected to reach $10.7 billion in the April quarter — 11.5% higher than Truist’s $9.6 billion model.
The company also unveiled a new stock buyback authorization of up to $10 billion extending through year-end.
Wall Street Weighs In
Truist Securities maintained its Buy rating alongside a $510 price target following the quarterly report. The broader analyst community consensus remains at strong buy, with price objectives spanning from $335 to $530.
Jefferies analysts acknowledged lingering concerns about AI spending levels, but noted that “Broadcom made a strong case for their AI revenue to outgrow the market.”
RBC Capital adopted a more reserved position, reducing its price target to $340 from $370 while keeping a Sector Perform rating, expressing caution regarding AI demand sustainability.
UBS reaffirmed its Buy rating, highlighting attractive valuation metrics within the semiconductor segment.
Despite Thursday’s pre-market surge, AVGO shares remain down approximately 8.3% year-to-date. Nvidia, in contrast, has declined roughly 2% during the same timeframe.
Broadcom recently commenced shipments of what it describes as the industry’s first 2-nanometer custom compute chip built on its 3.5D platform. The company simultaneously introduced the BroadPeak chip, designed for next-generation 5G and 6G network infrastructure, delivering up to 40% power efficiency improvements.
Inventory levels rose approximately 9 days sequentially to around 60 days, exceeding the typical seasonal decrease of about 1 day — a metric analysts are expected to monitor closely in upcoming quarters.
