Key Highlights
- First quarter revenue reached $19.3 billion, marking a 29% year-over-year increase and setting a company record
- Artificial intelligence revenue doubled with a 106% surge to $8.4 billion, exceeding internal projections
- Second quarter outlook calls for $22 billion in total revenue and $14.8 billion from AI segments
- Morgan Stanley analyst upgraded price target from $462 to $470 while maintaining Overweight stance
- Wall Street forecasts suggest Broadcom’s AI revenue could reach $120 billion by fiscal year 2027
Shares of Broadcom (AVGO) climbed 4.8% to finish at $322.77 on March 5 following the semiconductor giant’s fiscal first quarter 2026 earnings release. Despite the post-earnings pop, shares have experienced modest pullback and continue trading in negative territory for the year.
The company delivered $19.31 billion in quarterly revenue, establishing a new company milestone while surpassing Wall Street’s $19.18 billion estimate. Adjusted earnings per share of $2.05 likewise exceeded the $2.03 consensus projection.
The headline figure centered on artificial intelligence revenue — $8.4 billion representing 106% year-over-year expansion and outpacing the company’s own internal forecasts.
Custom AI application-specific integrated circuit (ASIC) revenue demonstrated particular strength with 140% growth. AI networking sales advanced 60%, with management highlighting expectations for substantially faster networking expansion in the second quarter, fueled by Tomahawk Ethernet switches and SerDes technology.
Adjusted EBITDA increased 30% year-over-year to $13.1 billion, representing 68% of total revenue. Gross profit margins settled at 77%, moderating from the prior year’s 79.1% but remaining relatively stable.
Semiconductor Strength Concentrated in AI Segment
Semiconductor solutions revenue climbed 52% year-over-year to $12.5 billion. Revenue from non-AI chip products managed only 4% growth — underscoring where the company’s true expansion lies.
Infrastructure software revenue posted modest 1% advancement to $6.8 billion. Within that division, VMware-related revenue expanded 13%.
During the earnings conference call, CEO Hock Tan directly addressed market concerns about whether major language model developers might bypass chip suppliers like Broadcom by designing proprietary silicon. His remarks were unequivocal: “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 distributed $10.9 billion to shareholders during the quarter — comprising $3.1 billion in dividend payments and $7.8 billion through stock buybacks. Management also authorized an additional $10 billion repurchase program extending through fiscal 2026.
Wall Street Analyst Increases Valuation
Morgan Stanley’s Joseph Moore elevated his price objective on AVGO from $462 to $470 while reaffirming his Overweight recommendation. Moore characterized the quarterly performance as “strong,” citing AI-fueled outperformance and enhanced long-term forecast clarity.
The analyst observed that margin worries have diminished, networking divisions exceeded expectations, and the fiscal 2027 AI opportunity remains attractive as ASIC customer programs expand.
Broadcom issued second quarter guidance projecting approximately $22 billion in revenue, representing 47% year-over-year acceleration. AI-related revenue for the upcoming quarter is anticipated at $14.8 billion — a 76% year-over-year jump.
Management has communicated to the analyst community that its top five custom AI chip clients are executing successfully, positioning the company to generate over $100 billion in AI chip revenue during fiscal 2027 alone. Morgan Stanley’s research team places that estimate even higher at approximately $120 billion, suggesting potential for additional upward adjustments.
AVGO presently trades near 32 times fiscal 2026 earnings projections and approximately 22.5 times fiscal 2027 consensus estimates.
