Broadcom’s AI Revenue Surges, Fueling Record Growth and Ambitious Targets

Broadcom Inc. has reported explosive growth in its artificial intelligence segment, with revenue more than doubling in its latest quarter. The semiconductor giant’s results underscore its pivotal position in building the global infrastructure required for AI, with CEO Hock Tan forecasting even stronger acceleration ahead.

Financial Performance Exceeds Forecasts

For its fiscal first quarter, which concluded on February 1, Broadcom posted total revenue of $19.31 billion, a 29% year-over-year increase. Net income climbed to $7.35 billion, up from $5.50 billion in the prior-year period. On an adjusted basis, earnings per share came in at $2.05, surpassing the consensus analyst estimate of $2.03.

The standout performer was the company’s AI division. Revenue from AI semiconductors skyrocketed by 106% to reach $8.4 billion. This surge was primarily driven by robust demand for custom AI accelerators and networking solutions. Sales of application-specific integrated circuits (ASICs) jumped 140%, while AI networking revenue grew by 60%.

Guidance Signals Accelerating Momentum

The company’s outlook for the current second fiscal quarter significantly outpaces market expectations. Broadcom anticipates revenue of approximately $22 billion, well above the consensus estimate of $20.56 billion. This projection represents a 47% annual growth rate, indicating a clear acceleration from the previous quarter.

Should investors sell immediately? Or is it worth buying Broadcom?

Management expects the AI semiconductor business to remain exceptionally dynamic, targeting $10.7 billion in revenue. This would equate to a staggering 140% increase. On a conference call with analysts, CEO Hock Tan provided a remarkable long-term perspective, stating, “We already see that AI chips alone can drive over $100 billion in revenue by 2027.”

Strategic Partnerships Underpin Long-Term Visibility

Broadcom’s confidence is anchored in long-term supply agreements with the world’s leading technology firms. Tan provided specific details on these partnerships. He noted that for Anthropic, Google is expected to procure one gigawatt of Tensor Processing Units in 2026, increasing to over three gigawatts by 2027. OpenAI plans to install more than one gigawatt of its first-generation custom chip in 2027.

Meta Platforms remains a key partner, with its MTIA accelerator already in deployment. According to Tan, Meta is targeting several gigawatts of custom accelerator capacity starting in 2027. Broadcom has secured the necessary components through multi-year supply agreements extending through 2028.

Capital Return and Shareholder Value

The company generated $8.01 billion in free cash flow during the quarter. It returned $10.9 billion to shareholders, comprising $3.1 billion in dividend payments and $7.8 billion in share repurchases. Furthermore, the board of directors authorized a new $10 billion share repurchase program, effective through the end of 2026. The quarterly cash dividend was declared at $0.65 per share, payable on March 31.